“Southern Cross – Post Mortem”

For most of this year I have been writing about the Southern Cross residential care provider and its painful and slow demise.  See all the earlier posts in the TAG CLOUD by clicking on “Southern Cross”.

The pain was felt most acutely by the 31,000 elderly and frail residents who were left worrying about their security.  The slowness of the inevitable closure of the company was caused by the reluctance of all the key players to share in the pain and their callous disregard for the feeling of the residents.

The Southern Cross Management Team had a brief but vainglorious idea of attracting a £100million investor, but no such fool was found.  In a deathnell move they then unilaterally slashed the rents by 30%, but must have known that this was a last and suicidal action.

It must be said that in their brief life they had rising star status whilst they became the vehicle for demolishing the public sector provision and replacing it with new private sector buildings.  The accommodation was generally better but the care model was driven by financial return, not quality of life for residents.

In sharp contrast to the worries experienced by the residents during this difficult time, the senior management team were more than adequately rewarded for the mess they created.  Two previous Chief Executives left and sold their shares which were worth over £10million each.  I guess that must have cushioned the blow of unemployment.

At least Jamie Buchan, the Chief Executive for the last two years had the decency to forego his £495,000 annual salary, which he would have been paid as compensation for losing his job! 😦

  • The landlords and their bankers and vulture capitalists will have had their fingers badly burned by the experience.  They will be much more cautious about investing in this sector in future.  Those who traded revenue return in exchange for equity will have learned some uncomfortable lessons.  It is hard to see how this sector will attract new investment in years ahead, in spite of the huge growth forecast in the numbers of frail elderly people.  A new funding and provider model needs to be found.
  • The Care Quality Commission proved unable to find any constructive role in this situation.   They became a bystander, an impotant regulator and were completely useless in their key function of safeguarding vulnerable adults.
  • The Government (the Department of Health), successfully managed to keep their heads down and avoid any of the mud sticking to them.  Not exactly the leadership role they should be taking!  The problem of underfunded and poor quality residential care has not gone away.  There are many more providers still in a precarious financial position.

I have put forward a number of strategic alternative ways forward in my earlier blogs.  The Government needs to rethink the whole future of NHS and social care provision, otherwise we are heading for a disaster in care of the frail elderly.

  If we are not already there.

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2 Responses to “Southern Cross – Post Mortem”

  1. As you have said before John this is a difficult area. In my old fashioned way investing in a new product one needs assets. Basically the safest assets are property, and land over a long period of years.
    The elderly market and their pensions is a fixed income stream for the foreseeable future! Unles the government and pension schemes pay out annual pension rises of some 10% aboce RPI, so the financially wise investors, have a limited market? do they not?
    Existing elderly people who trade in or exhange their property for a retirement home or place to retire too, have at one instant in time a sum of money governed by the returns on the property market? again their personal desposable income is immediately limited, as the RPI and inflation and the inability for a pensioner or elderly person to earn a return for work done or on savings earned limits this market.
    As you say John this idea of Southern Cross, their Venture Capalist and the then political scene at the time the scheme was invisaged did us a diservice, and all the greedymen/ persons have disappeared, and it was a ‘ponza’ scheme where I believe they, the men that mattered dreamt that the scheme was too big to collapse and the government of today would have to pick up the pieces, and morally give some comfort to the elderly.
    It is a shame and is sociallism on a grand scale without scruples and morals, and the Blair Government of the day and those rotten Boroughs of the NE England must bare the brunt of accusations and now Mandleson and Blair should trade in their ill gotton gains to help the afflicted of the scheme they dreamt up with their cronies from the city.
    The Conservatives and the Liberals are no Angles so watch out, an absolute majority in politics often and in fact does corrupt. They all need a good swift kick up the backside!

  2. Great high quality content here. Absolutely nothing but the ideal. I genuinely like it.

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