Southern Cross set to shut down and stop running homes

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Care home operator Southern Cross is set to shut down after landlords owning all 752 of its care homes said they wanted to leave the group.

"It is currently envisaged that the existing group will cease to be an operator of homes," the firm said.

Southern Cross added that the landlords were still committed to providing continuity of care to its 31,000 residents.

Trading in the company's shares has been suspended.

The Darlington-based Southern Cross and its landlords and creditors are a month into a four-month restructuring period, which was agreed in crisis talks in June.

The statement said that the details of the restructuring were not yet settled and there was still a possibility of further changes.

It had been expected that some of the landlords would leave the group, leaving Southern Cross operating with between 250 and 400 homes, but now it appears that the group is to disappear altogether.

Analysis

Ministers have been quick to promise that Southern Cross residents will not be turfed out on to the street.

But that does not mean that these vulnerable people are not facing a great deal of uncertainty and, potentially, upheaval.

The hope now is that the group will be broken up into chunks for other providers to take on.

If that happens the new owners may still want to close some of the homes - something that everyone agrees is both distressing and damaging for the health of those involved.

But the Southern Cross developments raise wider questions about the whole sector.

While the problems the group has faced have been linked to its business model, the situation has been further compounded by cuts in fees paid by councils.

Last year alone fees paid by local authorities for state-funded care home residents were cut by about 2.5% once inflation was taken account.

Suffice to say, the squeeze has been felt across the industry - not just by Southern Cross. It is getting increasingly tough to keep services going.

'Regret'

The process began when the UK's biggest care home operator said it was unable to pay its rent bills to its landlords.

The statement said that little or no value would be left for the shareholders.

"We regret the loss of value which shareholders have experienced," Southern Cross chairman Christopher Fisher said.

About 250 of the homes will immediately begin to be transferred to other operators.

The owners of the rest of the homes are still finalising their plans, but they may end up using the existing Southern Cross back-office staff and some of its management.

'Worrying' time

"We anticipate that the period of uncertainty which we have been experiencing will now draw to a close," Mr Fisher added.

But Michelle Mitchell at Age UK, said that despite the promises about continuity of care, "this has been a really worrying few months for Southern Cross residents and their families, with these latest developments only adding to their concern".

Labour MP John Mann called on the government to intervene to make sure that care home residents were not forced to move.

"No resident should be forced to move out of their home and in the big sell-off there must be no cherry picking of the better properties," said Mr Mann, who has four Southern Cross homes in his constituency.

"Government intervention is needed now so that resident needs are put first and to prevent an even greater disaster from unfolding."

Fee question

Martin Green, chief executive of the English Community Care Association, said the collapse of Southern Cross showed there were serious problems with the funding of care in the independent sector.

"I think the Southern Cross issue which has come to a head today, is very much an issue that other providers are facing because of the levels of resource that they have to deliver care on," he told BBC Radio 4's You and Yours programme.

"Fees are a really big issue and we've had several years of nil increases, and of course we've had inflation rates running at 4-5%."

David Rogers, chairman of the Local Government Association's Community Wellbeing Board, said: "Councils take the welfare of care home residents extremely seriously and throughout this process that has always been their priority."

"It's greatly reassuring, and testament to the good work which has been going on behind the scenes and the resilience of the care home system, that a solution has been found which will hopefully avoid major upheaval for the vulnerable people involved."

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