Warning issued over investment in NHS trusts

Councils are being warned to be wary after a number of approaches seeking investment into NHS foundation trusts.

A number of councils are understood to have been approached by brokers inquiring whether they would be interested in placing money with a trust.

It is unclear whether all the queries relate to the same trust or a variety, but treasury adviser Arlingclose cautioned that although such investments may seem attractive, they are likely to be a non-starter.

Arlingclose client director David Blake, told Room151: “These investments may tick political boxes in terms of aiding social objectives and in investment terms as a way of increasing diversification away from the banking sector.

“However, the best rated trusts have their own source of cheap borrowing, so such approaches would raise questions about the motives of the borrower.”

Trusts can already borrow from the Independent Trust Financing Facility, which typically lends at 0.65% to 0.7% below PWLB certainty rate.

A significant number of trusts currently have weak financial stability risk or governance ratings, due to the increasing financial pressures on the NHS in England.

A briefing from Arlingclose seen by Room151 said: “As providers of public services, there is a high likelihood but no certainty of central government or regulatory intervention in the event of failure. Continuity of health services can be achieved without protecting the lenders.

“In this respect, we view the NHSFT sector as more like housing associations and universities than central government and local authorities.

“However, the low profitability and weak balance sheets of the trusts we have reviewed to date, and the widely publicised problems with NHS deficits, leads us to suspect that the individual financial strength of trusts is lower than that of many housing associations and universities.”

Photo (cropped): Andy G, Flickr