Uncertainty as Southern Cross announces it is to close

The group, which has 752 homes and 31,000 residents, has been locked in negotiations over a restructuring of the group's property arrangements, but following the landlords' decision it is now working on a plan to facilitate the transition of homes to new landlords and their new operators.

Southern Cross said that, to ensure continuity of care to residents, all payments to trade creditors are to be maintained and all home-based staff transferred on their current terms.

It added that it is expected the existing group will cease to be an operator of homes at the end of the restructuring period. The company's shares have been suspended with immediate effect.

A number of landlords, who are also operators of care homes, have indicated they intend to take over the running or have found new operators for 250 out of the 752 homes and will start to transfer operations shortly.

Landlords of the other 502 homes are said to be finalising their plans.

Some may require operational management and back office support, Southern Cross said, but once the restructuring period is over it anticipates it will "cease to be an operator of homes".

Shareholders will get nothing back, it added, with shares suspended on the Stock Exchange today.

Chief executive Jamie Buchan said: "My objective, and that of my team, is to continue to provide excellent care to every resident and to manage the programme of transition professionally.

"All 44,000 staff can take pride from the significant operational turnaround and improvements in care delivery which have been achieved over the past two years."

Dave Prentis, leader of Unison, called on the Government to take urgent action to protect the well-being of the residents in Southern Cross homes.

He said: "This will be a major upheaval and tragedy for people living and working in these homes. It comes as a timely warning to David Cameron about the dangers of his plans to bring in more private companies to run public services."

Michelle Mitchell, charity director at Age UK, said: "This has been a really worrying few months for Southern Cross residents and their families, with these latest developments only adding to their concern.

"We would urge everyone involved in the potential transfer of the Southern Cross homes to put the needs of the residents first, remembering that those living in the homes are very vulnerable and frail.

"The current situation only serves to highlight the need for Monitor, the new regulator for health and social care, to be given greater powers, including responsibility for ensuring the financial viability of care homes.

"Companies that are not able to show that they have a sustainable business model should not be allowed to run care homes."

Dot Gibson, general secretary of the National Pensioners Convention, said: "Tens of thousands of care home residents are now at the mercy of the financial markets because we have allowed the job of looking after our loved ones to be run like a business rather than a service.

"There is little doubt that forcing residents to move will in some cases have fatal consequences. Serious questions should be asked as to whether having 80 different landlords in charge of 752 care homes is a proper way of running our social care system. How can the interests of some of our most vulnerable older people be protected when profit is the driving motive?

"The Government needs to get a grip on this issue rather than having more commissions and consultations. Ministers need to step in with a publicly provided care system that is properly regulated and offers good quality care to all those in need."