Troubled Southern Cross to slash 3,000 jobs

By This Is Money
Updated: 11:14 EDT, 8 June 2011

Southern Cross has announced plans to shed up to 3,000 jobs as part of an overhaul of operations at its 750 care homes.

Crisis: Union calls job cuts 'start of a disaster' and says the Government must step in

The redundancies represent more than 6% of the workforce at the firm, which is trying to stave off bankruptcy by underpaying rent to its landlords.

The move prompted the GMB union to demand the Government intervene with 'immediate financial support' for Southern Cross to ensure it continues to operate and provide a home for 31,000 residents.

Southern Cross said the job cuts were intended to 'address levels of staff effectiveness' at its homes.

It has already begun consultations on the redundancies, which are expected to be completed by October, and the introduction of a standard employment contract for new and existing staff.

Home managers, deputy managers, relief managers, activity co-ordinators and administrators will not be affected by the redundancy programme, according to Southern Cross.

The firm has previously admitted it is in 'a critical financial position' and cannot afford to meet its future rent obligations in full.

Last month it said that pre-tax losses had widened to £310.9m in the half year to March 31, from £22.9m before.

It is reportedly planning to offload some 200 of its care homes as it struggles to avoid financial collapse.

Today chairman Christopher Fisher said: 'Notwithstanding the current financial pressures, Southern Cross is in the process of transforming the quality of its business.

'There is a real momentum behind the ambition of our management team and there is too much of value within our business for it to be lightly discarded.'

He added that decisions on the company's future must be governed by 'a paramount concern for the welfare of our residents'.

GMB general secretary Paul Kenny said: 'This is the start of a disaster for the residents as well as a kick in the teeth for the staff.

'This is the trigger for the government to step in with immediate financial support to ensure that Southern Cross continues to operate and continues to provide a home for 31,000 elderly and vulnerable residents looked after by 42,500 staff.

'The residents, their families and the staff demand immediate action from the Government today.'

Southern Cross's financial predicament has prompted widespread criticism of its business model, which involved the sale and then leaseback of its care homes.

The company has been squeezed as councils and primary care trusts have demanded rate reductions for residents due to funding cuts, while at the same time rents have risen.

The role of private equity firms in delivering sensitive public services has also come under attack. US-based Blackstone made an estimated £1bn on its investment in Southern Cross, which it floated in 2006.

Business Secretary Vince Cable has dubbed the crisis at Southern Cross 'a shocking state of affairs' and pledged a probe into the role of private equity ownership of public service providers.

Labour leader Ed Miliband yesterday accused Southern Cross of treating elderly people as 'commodities'.

'At Southern Cross, it is plain wrong that financiers creamed off millions, while - as we now know - the care of tens of thousands of elderly people was being put at risk,' he said.