Unions seek talks over Southern Cross care homes

UNIONS are seeking crisis talks with the Government over financial problems at Darlington care home operator Southern Cross.

Earlier this month the company warned it may breach its banking covenants, triggering fears that it could fall into administration.

Southern’s financial woes have been caused by rising rent costs and reduced fee income from local authorities and doomed primary care trusts – key customers which generate the bulk of its revenues.

The company, which provides care to more than 31,000 patients in 750 homes, is trying to ease the pressure by negotiating a cut in rents with landlords.

Now the GMB union has waded into the debate, claiming landlords are overcharging Southern by £100m a year.

The organisation wants the Government to intervene amid fears that thousands of elderly residents could be made homeless if Southern goes under.

Suzanne Reid, GMB organiser said: “We are seeking urgent talks with Government on the severe financial problems at Southern Cross.

“We want to ask what exactly the contingency plans are if Southern Cross and the Government fail to cut the rents and the company has to go into administration.”

“It’s about landlords being reasonable.

“The information that we’ve been given is that the charges are exceptionally excessive.

“The Government needs to put pressure on the landlords to get the costs down.”

Southern said it was confident it could reach an agreement on rental payments.

Chief executive Jamie Buchan said: “I believe it is in the interests of landlords to reach an equitable solution with us to help stabilise our business and create the conditions for new investment in our homes.

“Our plan is to seek to renegotiate the terms of our leases by July of this year.”

Since joining the group more than two years ago, Mr Buchan has led a cost-cutting programme aimed at reducing the company’s debt pile.

The sale of freehold assets helped to reduce net debt by £25.8m to £7.3m in the year to September 30. But in the same period losses at Southern more than doubled, from £19.8m to £47.4m.

Its outlook since the Government’s spending review last autumn has worsened, with council budgets cut by 26% and no protection for social care funding.

Like-for-like admissions to Southern’s elderly care business were down 7% in the three months to December 31, following a 15% slide in local authority admissions.