Care home giant Southern Cross facing administration

2 June 2011

The UK's biggest care home provider, Southern Cross, is "on the brink of administration", according to Scottish First Minister Alex Salmond.

The group has some 752 homes across the UK, providing care for 31,000 residents. Earlier this week it revealed it would have to defer 30% of its rent for the next four months while it grapples with its finances.

Rising rents
Speculation has been mounting since Southern Cross issued a statement last month citing rising rents as one of the key factors of its troubles.
At the time, the group said: "Southern Cross has been particularly challenged by the nature of the lease arrangements which underpin our business model. Within these leases, which are typically of a 25- to 35-year fixed term, rental payments are contracted to increase every year and there is no provision to close a home. We are currently in the process of renegotiating the terms of our leases."
Residents and staff at Southern Cross care homes across the UK now face an anxious wait to find out if the rent reduction will be enough to stave off closures.
The government is said to be monitoring the situation and has vowed to protect residents of the care homes.

John Healey, the shadow health secretary, said: "Thousands of very vulnerable people and their families will be worried sick by what's being reported about Southern Cross. Ministers must get a plan B in place if the company can't sort out its problems. People need to know they won't be left high and dry by the decisions of city hedge fund managers."

What the Southern Cross crisis means for you

Are the care homes likely to close?

The general consensus is that the majority of the care homes will be saved but it is possible a few will face closure.

What will happen to residents?

Philip Spiers is acting chief executive of First Stop care advice service. He says it is unlikely there will be many closures but if there are residents will be cared for.

"Local authorities have a duty to make sure the residents are accommodated, whether they are self-funded residents or local authority funded.

Where will residents go if the care homes are closed?

"If any care homes are closed, residents will have a choice as to where they will go next," says Spiers. "Obviously the new home would have to meet the resident's specific care needs and not cost more than the local authority was willing to pay."

What if the new home costs more than the local authority is willing to pay?

A third party, such as a relative, will be asked to help fund the cost of the care.

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