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Sir Robert Naylor |
Hospital ‘vulnerable’ over its ability to borrow new money
NEW accountancy rules set to come into effect next April could jeopardise a series of planned multi-million-pound developments at University College London Hospital.
Hospital chief executive Sir Robert Naylor said his team of financial experts had spent “a lot of time” monitoring the changes, which will affect all hospitals built under Private Finance Initiative, and admits the trust is in “a position of vulnerability”.
Under the PFI scheme, a partnership between the private and public sectors, a consortium of building companies called Health Management UCLH (HMU) was contracted to build the £422million public hospital in Euston Road.
The deal, fixed in 2000, means the trust must repay £64m each year to HMU for 40 years.
The appeal of PFI for UCLH bosses is that the massive debt can be kept off the trust’s “balance sheet”, allowing for increased borrowing.
But following international condemnation of this system – which can exaggerate an institution’s financial clout – the government has been forced to adopt new accounting standards forcing all PFI debts to be declared “on balance” from April.
Sir Robert said: “Because ours is the biggest completed PFI in the history of the health service, obviously we are in a position of vulnerability in this whole discussion.
“We have gone into this in quite some detail. What will happen is that the amount we can borrow is related to our financial strength and therefore it will have an impact on our ability to borrow.
“We will have to change our borrowing rules, as in to what extent we can go out into the market place.
“At the moment we could borrow in excess of around £100m. That £100m is based on today’s figures. If we can still do that [after April] is anyone’s guess.”
UCLH has a series of high-profile developments in the pipeline that are expected to be finished within 10 years, including a £110m cancer centre, the country’s leading medical research centre, a new heart hospital and a replacement for the Eastman Dental Hospital.
Sir Robert said: “What we are trying to do is gradually to acquire as many buildings in our area. Our plan is to knock them all down and build all the next developments.”
The cancer centre would not be affected by the changes in the accounting rules, Sir Robert said, but the future was not so certain.
He said: “We have a lot of cash, around £140m, invested, and none of it is in Iceland. The reason we have done so well is we sold the Middlesex Hospital for £175m.
“If we sold today, I have been told by leading property developers, we wouldn’t get £75m. The reality is we made £100m out of the private sector.
“We can pay for our new cancer centre out of our own money because we don’t have to borrow. We will not need to borrow for around four to five years.
“Only then we will need to because of our long-term developments. What will happen then is anyone’s guess.” |
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