Institutional Investment – Funding Transformation in the NHS


Whilst NHS England now have a Sustainability and TransformaFYFVtion Fund of £2.1bn for 2016/17, rising to £3.4bn in 2020/21, £1.8bn of this is ring fenced this year for the support of deficits leaving little for transformation. Not only is this money ring fenced for current sustainability issues but it also, unusually, requires the approval of HM Treasury before it is allocated and future release of any monies from the fund will also be based on the success or otherwise of local Sustainability & Transformation Plans.


Is there enough money for Transformation?

According to the Kings Fund in their publication – What the planning guidance means for the NHS 2016/17 and beyond:

‘Frontloading of the Spending Review settlement means that, if and when the NHS has the capacity to progress from deficit reduction to transformation, it will be doing so against a backdrop of much smaller funding increases (just 0.2 per cent and 0.1 per cent in real terms in 2018/19 and 2019/20 respectively). It is inconceivable that the NHS will be able to achieve both financial sustainability and large-scale transformation within these financial constraints.’


Time to Plan for the Long Term

Jim Mackey, Chief Executive of NHS Improvement, said“We need to look seriously at what can be done to realise the long-term improvements needed at a local level and to get on with making changes happen so that patients can rely on strong and sustainable services.”

However, the combination of smaller funding increases; centralisation of approval for release of funds; and the introduction of plans which rely absolutely on local co-operation between organisations if they are to achieve successful implement, means making change happen is very challenging.


Alternative Funding

NHS AssetsMany NHS Organisations, especially Hospital Trusts and Hospital Foundation Trusts have looked to obtain additional funds through rationalisation of their estate and the realisation of the value of the released asset via a capital receipt once the asset is sold. Whilst this is clearly a valid option the resultant funds are non-recurrent and the asset is permanently released from the NHS and so is the ability to derive a revenue stream from the asset. At a time of unprecedented change and transformation there is an alternative option.


Institutional Investors

Institutional investors, such as pension funds, are focusing on investment opportunities which can provide a steady and attractive long-term return. Mark Wiseman, president and CEO of the Canada Pension Plan Investment Board stated:

‘What we’re looking for is boring, predictable, long-term cash flows. And so the more seasoned the asset is, the more interesting it becomes to us, the more we’re willing to pay, and the better the alignment of interest.’

NHS Hospital Trusts and Foundation Trusts are near perfect examples of the owners of such seasoned assets. The investment would work as a concession for an agreed term of a number of years whereby the investor is willing to pay more than market value; agrees to the Trust retaining use and management of the asset; and the asset reverts back to the Trust at the end of the term. As a result, this type of investment can lead to increased revenue streams and have a particular immediate benefit on liquidity and the Income & Expenditure position of the Trust in question.


We at USL are experienced in carrying out feasibility studies and options appraisals to see if this type of investment is suitable. If you would like to explore this kind of investment further please contact either Ian Chadwick or James Donnison on 0800 019 8980 or email us at


This article is also available as a pdf: USL Newsletter September 2016

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