Wednesday, August 11, 2010

Going up – going down – going up – going down and down and down

This is the share price chart of Southern Cross, the UK’s biggest care homes group. Another dip in price  after it warned about its full-year profits

The chief culprit, according to the company, are local authorities who are cutting back on funding for residents.

Southern Cross, like most of the care homes groups has made horrible financial mistakes, but today’s problems are all about the repercussions in the cuts in Government spending.

The terrifying this is that the real cuts have yet to occur.

The first victims of the cuts are not going to be felt in the public sector but the zillions of contractors that rely on state spending for their livelihood. Many of these companies have only known a market environment where they have a single customer – the state. They had better start (and fast) acquiring the skills to sell to the citizen.

I fear this is going to be a step too far for many of the care providers. Dick Stroud

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