The contractor had been given since the start of the year to improve its performance.
But the council confirmed today it will be cancelling its deal with Morrison and changing the way repairs in the borough are carried-out.
Councillor Ian Wingfield, cabinet member for housing, said: “This is not a decision which the borough has taken lightly but we feel that to move repairs performance on to the next level, we need a new approach to service delivery.”
There is a six-month notice period which means Morrison will finish on October 2..
Southwark will then appoint an interim repairs and maintenance contractor for one year until October 2013 while it works on procurement of a longer-term deal.
Cllr Wingfield said: “It is very important to the council that any new repairs service is focused on residents and a new contract gives the council the opportunity to design the service around the customer.”
Morrison said: “This is of course disappointing news for all our staff who have worked incredibly hard over the last few months to successfully deliver against a set of improvements agreed with Southwark Council.
“Today’s decision is in no way a reflection of Morrison’s performance and it would be wrong for this impression to be given.”