BRITAIN’S largest care home group could collapse within six weeks, raising concerns for the future welfare of 31,000 elderly residents.

Darlington-based Southern Cross Healthcare, which leases the majority of its 750 homes, admitted yesterday it is in a “critical financial position”.

It is unlikely to be able to continue trading if it cannot agree rent reductions with landlords and its banks withdraw a £50m credit facility that is presently only guaranteed to June 30. To add to its woes, the firm yesterday announced a loss before tax of £311m for the six months to March – although £293m of that came after it wrote-down the value of its investments.

The group said it was confident that care for its residents would continue.

Nevertheless, Darlington Borough Council, Durham County Council and North Yorkshire County Council all said last night that they had contingency plans in place should the worst happen.

Second World War veteran John Twigger, 88, whose brother-in-law is a resident in a Southern Cross home, last night described the situation as “disgraceful”. He said 91- year-old Steven Dickens was paying more than £2,000 a month to stay at the Rose Lodge care home, in Newton Aycliffe, County Durham.

Mr Twigger, who lives in nearby Woodham, said: “I think it’s crazy. People like my brother-in-law, who was in the Merchant Navy, are going to be put on the scrapheap.”

Mr Twigger said he was very concerned about the future, saying he feared elderly people were going to be “put on the streets”.

He added: “The saddest part is my brother-in-law is 91 and he thinks this is his home. I think it would kill him if he went somewhere else – that’s the same for many old people.”

The company’s chairman, Christopher Fisher, said Southern Cross was in a “critical financial position and could not afford to meet its future rent obligations in full”.

Agreements with landlords that it signed five years ago, some for up to 30 years, have seen rents rise faster than the fees it receives for residents’ care from local authorities, on which it is heavily dependent.

The number of residents funded by the local authority being admitted to its homes has also dropped by 15 per cent since last year, although it has increased the number of selffunded residents.

The firm, which employs more than 200 people at its base in Archer Street, Darlington, and 6,000 across 100 North-East homes, has been trying to renegotiate the rents since last September.

Southern Cross, which last week announced the appointment of investment banking company Greenhill and Co as joint financial advisor with KPMG, has twice held meetings with its principal landlords.

The firm initially asked for a four-month “summer platform”

from June 1, during which time landlords would agree to a 30 per cent deferral of monthly rents, while negotiations over longer-term rent cuts were ongoing.

Chief executive Jamie Buchan denied a solution had to be found by the end of next month. He said: “It is a tough situation, but we believe there is a way through and a longterm positive future for this company.

“We have to take it one step at a time, stabilise the financial future of the business and then go forward to secure opportunities to grow the business.”

He was also confident that care for its residents, among them 2,000 in the North-East and North Yorkshire, would continue.

Mr Buchan said: “One of the things that is important is that people being placed with ourselves continue to have confidence.

“It isn’t in the interests of ourselves, the banks, the landlords or the shareholders to have anything that disrupts the continuity of care.”

Care Services Minister Paul Burstow said: “Southern Cross has had discussions with Government officials about the plans they have in place to address their financial difficulties and ensure that service and quality are maintained.”