Southern Cross to get tough over fees

Southern Cross Healthcare, which operates 752 care homes across the UK and employs 43,000 people, slumped into the red by 47.4m in the year to September 30 against 19.8m in pre-tax losses the year before. The group has suffered as councils and primary care trusts, which pay for more than 70 per cent of its customers, have demanded rate reductions while rents have risen. Its outlook since the Government's spending review has worsened, with council budgets cut by 26 per cent.

But Southern – which is holding ongoing talks with potential takeover suitors – said forthcoming negotiations with councils over fees would be "critical".

Jamie Buchan, Southern Cross chief executive, said: "Given the cost pressures facing our industry, including the reasonable expectations of the people who work within it and the increasing acuity of residents placed in its care, it is very clear no local authority can justify reductions in fee levels at this time."