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 to 2017 but it has risen to around £11.5 million.
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 suspending 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.
“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.”