Last week’s announcement that an administrator is to be appointed at South London Healthcare Trust, with all that follows under the National Health Service Act 2006, brings two immediate harmful effects. It’s sad indeed that both appear to have been encouraged and even praised.

The first is that the cost of borrowing for the NHS escalates. That’s for all NHS organisations, not just the 20 or so known by insiders to be in financial trouble.

When the news from south-east London broke, the trust was widely reported as bankrupt. In fact, the trust is far from bankrupt, and the NHS as a whole is cash rich. But the perception that an NHS body might be allowed to fail, that staff and creditors might go unpaid, is enough. If South London can go bung, so might anywhere.

The cost of borrowing depends directly on the investment’s perceived risk. That’s why governments borrow more cheaply than even the largest private concerns. Governments don’t go bust. Even Greece has managed to honour its debts, so far. Yet, in the interests of a “level playing field” and encouraging competition, this advantage has been discarded. NHS bodies will pay the price.

The second is an extended period of uncertainty for more than 6,000 employees. The administrator’s role is to transfer staff to other bodies, close existing services, or both.

For the individuals, this is no hypothetical risk. There’s plenty of evidence “workforce efficiencies” are high on the government agenda: 3,000 nurses in Bexley and Bromley, Sidcup and Woolwich, that means you. There’s good reason to believe that, especially for non-clinical staff, a takeover by a commercial provider would be attractive. The big outsourcing firms are already making hay in the non-acute sector as contracts come up for tender under the “any qualified provider” regime.

South London Healthcare is one of the biggest employers in south-east London. Its staff, who previously felt secure, will now think twice about fitting that new kitchen; repairing that old plumbing; or replacing that fridge. And across England tens of thousands of other hospital employees, from Surrey and Sussex to mid-Yorkshire, will think twice before spending money.

It’s not exactly going to kick-start an economic recovery.

Noel Plumridge is an independent consultant and former NHS finance director,