I know that constituents have read about the crisis facing Southern Cross and are concerned about the potential impact upon Glasgow – below is the latest briefing supplied to Councillors from Social Work in this regard.
Briefing on the Current Position of Southern Cross
Date 3 June 2011
1. Background
Southern Cross is the UK’s largest Care Home operator. The provider is experiencing severe financial constraints that may lead to Administration.
2. Glasgow Service Users
There are 8 Southern Cross care homes within Glasgow with capacity to support 497 individuals. Currently there are 421 service users receiving support within Southern Cross’ Glasgow based Care Homes. Glasgow City Council placed 335 of these individuals with the remaining 86 service users placed by external Local Authorities. In addition to this Glasgow City council has placed a further 176 individuals in Southern Cross Care Homes across the UK (173 out with Glasgow but within Scotland, and 3 out with Scotland). Glasgow City Council’s total spend with Southern Cross is c£10.5m (c£7m within Glasgow based services and c£3.5m out with).
3. Business Position
None of the Southern Cross properties are owned by the provider. Rather, the company has indicated that it cannot honour the rent agreements it has with its landlords going forward. Southern Cross Senior Management met with property owners at the end of April 2011. It has intimated its intention to apply a 30% reduction in the rental charges payable to its landlords, deferred for 3 months. Consequently:
- Southern Cross is not breaching bank covenants
- Enables further negotiations concerning long term rental charges
- Enables negotiations to take place with prospective investors
It is not clear that all of Southern Cross’ landlords are supportive of this action, the consequences of which will only become clear over time.
4. Discussions with Southern Cross
A meeting between Glasgow City Council Social Work Services and Southern Cross took place on the 17 May 2011. Southern Cross could not divulge details of any specific care home closures due to limitations of being a public limited company. However, they did advise that they had collated criteria to identify Care Homes that were likely to have a “limited lifespan”. Southern Cross intimated that none of the Glasgow Care homes fit the “limited life” criteria.
A National Contingency Planning Group hosted by COSLA has been convened and meets regularly. Southern Cross has advised through COSLA that there are 10 care homes within Scotland that are likely to close. Sefton park care home in South Lanarkshire is the first care home to be closed (2 August 2011). There are 7 Glasgow service users at Sefton Park. Arrangements are in place to deal with this.
A further Social Work Services / Southern Cross Senior Management meeting is planned for mid July 2011. In the interim Southern Cross agreed to contact Social Work Services with any significant developments.
5. Contingency Planning
A national contingency planning group hosted by COSLA has been established with a focus on Southern Cross. Glasgow City Council is developing its own contingency planning arrangements in line with the broader national contingency plan. Even were Southern Cross to go into administration a worst case scenario where all existing residents physically have to move is highly unlikely due to the likelihood of at least a partial takeover from another provider. However, even allowing for this worst-case scenario there is sufficient capacity within the City to accommodate all of the 421 residents currently living here. The contingency plan will also identify alternative locations for those service users living out with the City. In extremes, support would be sought from the NHS to make hospital beds available on an emergency basis.
6. Conclusion
We remain vigilant in our monitoring of Southern Cross’ position whilst it is prudent to contingency plan for the worst-case scenario highlighted above it remains an unlikely scenario.