A private company has been given the final go-ahead to take over the running of a debt-ridden NHS hospital.

Circle signed a £1 billion ten-year contract to run Hinchingbrooke Health Care Trust in Cambridgeshire.

The firm will become the first ever non-state provider to deliver a full range of NHS district general hospital services when the contract starts in February next year.

Although private sector firms already operate units within the NHS - such as hip replacement centres - Circle, one of Britain’s most prominent health care providers, is the first to take over an entire hospital.

The landmark decision was cemented last night when representatives from the trust and the company signed the contracts.

The hospital called it a “groundbreaking new model of management”.

It was originally announced in November last year that Circle was to be awarded the management franchise to run Hinchingbrooke after being selected from a shortlist of three, in a process initiated by the former Labour government.

The first task facing the company will be dealing with Hinchingbrooke’s legacy of £39 million debts, despite an annual turnover of £90 million.

Under the terms of the agreement, the staff and assets will remain part of the NHS.

Director of policy and strategy at NHS Midlands and East, Dr Stephen Dunn, said the signing of the 10-year contract was a “momentous day”.

He said: “This is a great day for the people of Huntingdonshire.

“It ends the uncertainty that has hung over the hospital for nearly five years.

“Without this partnership, the future for Hinchingbrooke could have been uncertain. Now we have a solution which aims to repay the hospital’s taxpayer debt of almost £40 million, as well as giving it the best chance of a sustainable future.

“Patients will continue to receive high quality NHS services from NHS staff in the NHS hospital they know. This is not privatisation. Staff and assets will remain in the NHS.

“This is a change in management - not a change in services.

“Circle secured this franchise following an open competition. They outshone the best of the best from the NHS and independent sectors.

“This will usher in a new era for this much-loved local hospital.”

Dr Dunn added that unions Unison and the Royal College of Nurses were part of the consultation process.

He said Circle will have the same freedoms as other NHS managers adding: “Although there will be changes, this agreement does not rely on any redundancies.”