Southern Cross company to close down

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by a Newsnet reporter

The financially striken Southern Cross company is to be legally wound up today.  The company runs around 750 residential care homes across the UK, of which 98 are in Scotland.  Over 31,000 vulnerable elderly and disabled adults are residents in the company’s homes.  The closure of the company comes sooner than expected, as previous indications from the company had suggested that the board would have until September to reach an agreement with the company’s creditors.  All the care homes run by the company will now be taken over by their landlords.

The company was brought down by its complex financial structure.  During the property boom the company sold off all its care homes and entered into leasing arrangements with landlords.  However falling revenues and increasing rents meant that the company was no longer able to meet its monthly rent bill.  

250 of the care homes are owned by care home operators and will now be run by their owners.  However there is uncertainty over the future of the remaining 500 homes where the transition to new operators and financial arrangements have yet to be finalised.  The majority of these homes are owned by property companies without experience in care provision.  According to the GMB union which represents many of the care staff, 336 of the care homes are owned by companies registered outside the UK, of which 325 are registered in tax havens including 199 belonging to companies registered in the Cayman Islands.

Local authorities have a statutory duty to provide care for vulnerable adults.  Many of the residents of Southern Cross homes are placed there by the local authority which retains legal responsibility for their care and well-being. Today a number of local authority spokespeople stressed that they do not expect any care homes to close in the short term.  Only a very small number of homes will be closed, but even these homes will stay open until alternative arrangements have been made for residents.

Scottish local authorities are advising residents and their families that the homes will continue to operate. Scottish local authorities are working closely with COSLA, the Scottish government, care providers and the care home owners in order to ensure continuity of care for residents.  Southern Cross care home managers will provide families and residents with regular updates on the situation.

44,000 staff now face uncertainty about their future.  Unions have expressed their fears that some staff may lose their jobs, and in those homes which remain open all staff will now have to sign new work contracts with new employers.  Workers may find themselves forced to accept poorer working conditions or lower wages.