NHS North West is to compensate a specialist cancer foundation trust for the £6.5m it lost in the Icelandic banking collapse.

The Christie foundation trust lost the money, which was raised by its charity, the Christie charity, when the Kaupthing, Singer and Friedlander bank collapsed in October.

Its application for the sum to be returned by the financial services compensation scheme was rejected in March, a decision it planned to challenge at the High Court.

The strategic health authority said the decision to compensate the trust would “not compromise any other NHS services or plans and will enable the Christie to develop cancer services for patients in the region”.

NHS North West chief executive Mike Farrar said in a statement: “Our primary concern is to ensure the seven million people in our region receive the best possible healthcare services.

Difficult times

“Having such an important cancer centre potentially compromised in such an unprecedented event moved us to look at how we could help the Christie in these difficult times.

“The recent campaign by local people calling for the money to be returned to the Christie has been very powerful and very passionate. This was a unique situation which needed a unique solution, and I am pleased we have found a way to provide that for the people in this region.”

The money was invested in May and July 2008 “following expert financial advice”, the statement said.

The Christie chief executive Caroline Shaw said: “We are delighted with the support of the North West strategic health authority.

“We were taking our case for the return of the money to judicial review and the legal opinion was that we had a very strong case.

“Last week our papers were filed in the High Court, but in view of this cash offer we have agreed to withdraw legal proceedings. We can now take forward important plans which will bring huge benefits to cancer patients.

“We have always been determined not to rest until this money was returned to us. I want to personally thank the 100,000 people who got behind the campaign for their fantastic support.”