Subject to full regulatory, board and governor approvals, the proposed new organisation was on track to launch this summer at the earliest.
But the boards of both NHS Foundation Trusts announced they had decided to pause the process to allow more time to focus on the “deteriorating” financial position faced by the Royal Surrey.
The five-year plan for the Royal Surrey from 2014 estimated it would have a deficit of £1.4 million in the financial year 2016/17 but it has risen to around £11.5 million.
Both hospitals have so far spent £2.2million each progressing the merger transaction. Ashford and St Peter’s deficit for 2016/17 is £167,000.
Citing pressures on the NHS nationally, both financially and operationally, with the deteriorating financial position at Royal Surrey as a “significant contributing factor”, both trusts now consider the current merger plans would not deliver sufficient benefits to make them viable.
They are pausing the detailed merger work to focus on getting the finances back on track in order to ensure the new organisation will be successful.
Both trusts said they still believe creating a bigger, stronger organisation is one of the best ways to secure and protect high quality services for patients, but they now look for savings and better ways of working together.
Royal Surrey chairman John Denning, said: “This is not a decision our boards have taken lightly, particularly as we have put a lot of work and effort into these plans to date.
“We are both clear that resolving our immediate financial difficulties has to be our priority over the coming months. This is very much a joint decision and one that both boards feel puts us in a mutually beneficial position to create the solid foundation needed for the new organisation to be successful.
“Both boards still believe that creating a bigger, stronger organisation is one of the best ways to secure and protect high quality services for our patients, but this has to be done at the right time.”
Ashford and St Peter’s chairman Aileen McLeish added: “We appreciate this pause creates uncertainty, particularly for our staff, but it’s clearly in everyone’s interests to make sure we are pursuing the right plans at the right time.
“We have always said we will only do this if it is in the best interests of our patients and addressing these immediate issues is the best way to secure a sound future for both patients and staff.”