Spin off companies

Why set up subsidiary companies?

Trusts had been enthusiastic about this approach as a way to save money and reduce deficits with many companies set up and many more planned around the period 2013-2018.

There are two ways money can be saved:

• through the VAT system - a private company working for the NHS is covered by different tax rules and can claim back any VAT it is charged from the Government;

• and, by changing the pay and conditions of staff - the companies will not be obliged to employ new staff on NHS pay and conditions but will instead be able to offer very much worse terms of employment.

In February 2018, HSJ's analysis identified 19 providers that had set-up a subsidiary company to manage their estate, plus another 16 that have told staff they are considering the move. Since then, some trusts have abandoned plans and others have gone ahead. In early 2025, 29 active Sub Cos were found on Companies House reporting accounts for the year to March 2023 or March 2024. A list of subsidiaries can be found here.

What did trusts stop setting up Sub Cos?

There were two reasons trusts rolled back their enthusiasm for Sub Cos post-2018 - opposition from unions and employees and new guidance from NHS England.

Plans in many trusts were vehemently opposed by unions and employees and led to strike action at several trusts leading in some cases to trusts dropping plans, such as in Frimley and Bradford (see below).

In August 2018, NHS Improvement waded into the arena and announced a consultation over the setting up of subsidiary companies by foundation trusts, in particular. In November 2018, NHS Improvement announced that NHSI would have to look-over a business case for the formation of a subsidiary company and then decide whether to give approval; NHSI could stop a subsidiary company being formed if it thinks it is a risky plan. This effectively halted many of the plans to develop SubCos put forward by Trusts.

Why things are likely to change now

Trusts are under immense pressure to save money and cut their deficits. In March 2025, Sir Jim Mackey, NHS England’s transition CEO, told health service leaders at a meeting that new measures were needed to try to “reset” finances including cutting integrated care board management budgets by 50%, and telling trusts to cut “corporate services” budgets back to pre-pandemic levels. MacKey told the meeting that trusts should normally be transferring support staff to wholly-owned subsidiary companies.

In February 2024 the 2018 guidance was replaced with much more hands-off guidance that means that not all subsidiary proposals from NHS trusts and foundation trusts are reportable.

The Issues

Long-term protection removed for lowest paid staff

A major issue with the subsidiary companies is the issue of employees having contracts that are much worse than in the NHS, in terms of pay and pensions. The staff involved in these new companies include porters, administration staff, catering and maintenance staff, who are already some of the lowest paid in the NHS.

Unison has highlighted several drawbacks for staff in these new companies: long-term protection of pay and pensions for those transferring to new companies is weak, plus new staff will be employed on less favourable contracts with no access to the NHS Pension Scheme.

Unison also notes that it has an impact on staff that transfer: "all it takes is one change to the way the company operates and existing staff could find themselves at risk too. And once such companies have been set up it is far easier for trusts to transfer other non-clinical staff and services in future."

In an article in The Guardian in 2018, Sara Gorton, Unison's head of health, said: “There’s a worrying rash of NHS trust-owned subsidiary companies spreading across England. This outsourcing by stealth throws up huge concerns. Most significantly it creates a two-tier workforce, where new staff are far worse off in terms of wages, sick pay and pensions… It is nonsense that there is an active tax incentive for organisations to treat staff in administrative and support functions as second class employees.”

In 2023, an investigation of existing SubCos by HSJ found that trusts were regularly denying staff employed by their wholly owned subsidiary companies access to the NHS pension and providing them with schemes which are significantly less generous. Thousands of sub co staff were enrolled into schemes to which employers contribute as little as 3% of their salary; the NHS pension has an employer contribution of 20.68% of salary and offers an index-linked pension related to average career earnings. Many of the SubCo schemes are dependent on investment returns and deduct charges for managing the scheme from the contributions.

The investigation also found that some trusts were paying SubCo staff less than the lowest Agenda for Change rate. Other payments were also lower including, uplift payments for unsocial hours at evenings and weekends, maternity and sick pay rates, than those enjoyed by directly employed NHS staff.

Subsidiaries might not reduce deficits

The accounts of some of these subsidiary companies throw into question whether the setting up of a subsidiary company is actually a valid response to reduce a deficit. A look at King’s College Hospital Trust and its subsidiary KFM, reveals just how complicated and even absurd the whole situation can become between a trust and its subsidiary. In 2017/2018 King’s College Hospital Trust had one of the largest deficits reported of £132 million and in 2018/2019 it was expected to rise to £146 million. In 2016 it set up the wholly-owned subsidiary company KFM and transferred around 60 employees.

Details from King’s College Hospital Trust accounts for 2017/2018 reveal that it recorded nearly £10 million in income from KFM. The income was from the sale of equipment to KFM, including scanners, however, the £9.9 million KFM used to buy the equipment was obtained via a loan from King’s College Hospital Trust, itself.

KFM only has contracts with the trust and charges the trust £97 million a year for these services. KFM also charges the trust for use of the equipment that it has just bought off the trust. Furthermore, KFM is financially dependent on the trust, with King’s College Hospital Trust having agreed to a “revolving loan facility” with KFM of £30 million. This is due to be repaid in full in March 2027 and interest is paid at the Bank of England base rate plus 2%.

Accountability and conflict of interest issues

The KFM/King’s College Hospital trust situation also highlights issues around accountability and conflict of interest with the subsidiary companies; until recently several board members of KFM were also finance directors of the trust.

In February 2018, the HSJ reported that a director of Essentia, spun-off from Guy's and St Thomas' FT in 2013, had a “clear potential conflict of interest” as the director was also its estates director.

Companies formed under the radar

Many companies developed under the radar before the process hit the headlines in 2018; Guy's and St Thomas' FT spun out the company Essentia in 2013 to run its estates and facilities, Gateshead Healthcare NHS Trust set up QE Facilities in April 2014 and Northumberland, Tyne & Wear (NTW) NHS Foundation Trust's NTW Solutions was incorporated in November 2016, according to Companies House.

More recent attempts at setting up spin-off companies have attracted opposition from staff and unions. In some cases, successful campaigns have led to a change of heart by the hospital trust, in others, the trusts have gone ahead despite opposition.

Cases that have hit the headlines

Frimley Health Foundation Trust halts plans

In November 2019, plans for around 1,000 support staff at Frimley Health Foundation Trust’s three hospitals – Frimley Park, Heatherwood and Wexham Park – to be transferred out of the NHS into a new wholly-owned subsidiary (WOS) were halted by the threat of a planned coordinated 48-hour strike by all three major unions.

An agreement was secured over the weekend by UNISON, which represents the majority of porters, security guards, cleaners and catering staff employed by the Trust.  The Trust gave a commitment not to continue with its existing plans while other options are pursued, including possible ways to keep the staff employed within the NHS. In view of this UNISON agreed to take no further action for the time being.

The other two unions, Unite, with 90 of its members at the Trust working in estates’ management, equipment maintenance, catering, portering, procurement and security having voted 92% for strike action, and the GMB which had “drawn a line in the sand” against the plans, went ahead with their action and public protests on November 18-19.

Bradford Teaching Hospitals FT

In August 2019, the staff at Bradford Teaching Hospitals Foundation Trusts went on strike for two weeks in a campaign against the transfer of around 300 staff to a subsidiary on 1 October 2019, known as Bradford Healthcare Facilities Management Ltd. The action began in July 2019, with a week of industrial action from support staff, including porters, security and catering staff. In late August, the union, Unison, called off the planned indefinite strike, following constructive talks with the hospital's management. The transfer of staff was postponed until February 2020, then in November 2019 Mel Pickup, the new chief executive at Bradford Teaching Hospitals Foundation Trust, confirmed that the FT would not go ahead with plans to establish a subsidiary.

No staff consultation at Yeovil Hospital

At Yeovil District Hospital, the decision was made in 2017 to set-up a spin-off company to employ 360 support staff; the company, known as Simply Serve, was set up in July 2017. A month-long consultation process was reported to have taken place, with a final decision taken at a meeting on 20 December 2017.

A Unison representative reported that they were not allowed to speak at the December meeting and Unison has reported that the hospital board has refused to consult with staff representatives. The hospital management says that the new company will "mirror" NHS terms and conditions, including pay settlements, for a minimum of five years. The 360 support staff were transferred to Simply Serve on 1 February 2018.

Gloucestershire goes ahead despite opposition

In October 2017, Gloucestershire Hospitals NHS Foundation Trust announced plans to create a new subsidiary company to deal with non-clinical support staff as part of a plan to deal with its £47 million maintenance backlog. This would involve an estimated 900 hospital staff in Gloucestershire being transferred to a separate commercial company.

The trust is in financial special measures and needed to reduce an annual budget deficit of more than £14 million. The trust believes that the new company would save around £35 million over ten years, through "improved utilisation, better performance management and VAT recovery."

A campaign took place in Gloucestershire against the trust's plans for the transfer of around 750 staff; this was dealt a blow in March 2018 when the board of the trust confirmed that staff would be transferred 1 April 2018. Unison, Unite the Union and the Royal College of Nursing issued a joint statement noting that "the Board of the Trust has ignored the views of the 900 staff who signed the petition specifically opposing the plan, and the fifteen-page consultation response which was submitted by all three unions outlining in detail the reasons for our opposition."

Subsidiary goes ahead in York despite strike action

Plans to set up a subsidiary at the York Teaching Hospitals Trust met opposition from unions. In September 2018, Unite staff at the Trust announced a strike for 48 hours from 27 to 29 September 2018; 92% of almost 200 members voting in favour of strike action over the trust’s plan to create a subsidiary company.  York University Hospitals Trust, however, went ahead with setting up a limited liability partnership between York Teaching Hospitals Foundation Trust and Northumbria Healthcare Facilities Management Ltd, known as York Teaching Hospitals Facilities Management LLP. This began operating in October 2018 and now has around 710 staff, most transferred from the foundation trust.

Wrightington, Wigan & Leigh plans halted

The Wrightington, Wigan & Leigh NHS Foundation Trust planned to move 900 staff in estates and facilities, including porters, cleaners, caterers, transport workers and switchboard operators, to the new subsidiary firm, WWL Solutions.

Opposition to the move was substantial, including the unions, MPs and councillors. A strike of those affected by the move began the morning of 27 June 2018 and continued for five days.

Despite the industrial action, the board made the decision to go ahead with the subsidiary company on the afternoon of 27 June 2018. However, Wigan council intervened and brokered a deal, whereby an increase in investment of £2 million by the council in social care would reduce the demands on the hospital trust. The hospital trust then agreed to reverse its plans for the subsidiary company.

Royal United Bath puts the idea on hold

In Bath, the Royal United Bath Hospital Trust was investigating setting up a subsidiary company that would be wholly owned by the Royal United Hospitals Bath NHS Foundation Trust to employ about 500 of its support staff such as porters, catering staff, administration staff and tradespeople. In this case, the trust in Bath is reported to be currently engaging with staff over the plans. In March 2018, Unison reported that the idea was on hold.

Idea abandoned in Bristol

In January 2018, Southmead Hospital in Bristol part of North Bristol Trust announced that it was considering setting up a spin-off company to employ the non-clinical staff in the hospital trust in an effort to save money. However, following a campaign by the unions and other campaign groups, plus a backlash from the staff themselves, the trust has dropped the plans.

Staff, unions and politicians were very concerned about the plans. Workers at Southmead Hospital told the Bristol Post “the move would be ‘NHS privatisation by the back door’,” and Bristol South MP Karin Smyth, told the paper that “taking the jobs outside the NHS would mean people working at the hospital would end up being paid less with worse conditions.”

The plans in Bristol would have affected all non-clinical staff currently employed by the North Bristol NHS Trust, which includes Southmead hospital. The board had reportedly paid £12,000 for a feasibility study.