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New Royal Update - September 2018

Dear stakeholders,

As you will be aware since the last update, the government has agreed to provide a funding package to Sandwell and West Birmingham NHS Trust in order to complete the Midland Metropolitan Hospital. Many people have asked why the same has not been provided for the new Royal.

Our situation and that of Sandwell and West Birmingham NHS Trust differ significantly, in that the Midland Metropolitan Hospital was in its early stages and it proved impossible to reach an agreed rescue package with their funders. A taxpayer funded solution was therefore the best value option to getting the hospital completed. Sandwell and West Birmingham NHS Trust will now need to go out to tender, which will add a substantial amount of time to their expected date of delivery.

With the new Royal, construction is much nearer to completion. Up to now, the funders for the project remain committed and they have been prepared to invest significant additional funding to achieve completion. Therefore reaching an agreement with the existing funders is the quickest route to getting the new Royal completed.

There has been added complexity in reaching an estimate of the costs to complete the new Royal, as a result of remedial work required to correct faults created by Carillion. A structural engineering firm, Arup, have been engaged over recent months to identify the work required to complete the scheme. Arup have identified the requirement for further improvements to the structure and to cladding.

Before they entered into liquidation, the Trust sought assurances from Carillion about this cladding and they told us that:

“There are a number of different cladding systems utilised on the Royal Liverpool University Hospital all of which have been specified and installed to meet the required standards of fire safety….The new hospital has been designed to comply with the requirements of HTM05-02 “Firecode – Fire Safety in the design of healthcare premises.”

The recent review has found this not to be the case with some parts of the cladding.

Despite these issues the funders, (the European Investment Bank and Legal and General pensions) have been keen to find a way to continue to support the project. This type of infrastructure investment is what the EIB was set up for and what Legal and General pension schemes most often support. If the funders were no longer able to provide support, then we would require government support similar to that provided to Sandwell and West Birmingham NHS Trust.

In line with the project agreement, the Trust can terminate the contract with the Hospital Company, if the new Royal hasn’t been handed over by the ‘long stop date’. That date is 30 September and the Board will be discussing all their options later this month. If the contract was terminated, we would need to engage the lenders in complex discussions regarding the status of their investment. These discussions would need to be resolved before a new contract to complete the hospital could be agreed.

In the meantime, discussions between the government and the funders to agree a way forward are continuing and we expect these discussions to generate an agreed outcome very soon.

Whilst we remain in the current Royal, we continue to carry out both emergency and planned maintenance (across all our hospitals) to ensure that patients are treated in a safe environment. So whilst the current building does not provide the high quality environment we all want for our patients, we do invest in and work extremely hard to ensure that it is safe. We will continue essential maintenance as and when required to ensure patient safety and have set aside funds to do so.

We would like to thank you all for your ongoing support, understanding and patience throughout this challenging time.