Papworth Hospital Foundation Trust has finally secured its long-awaited move to a site on Addenbrooke’s hospital, thanks to a £165m funding package agreed by the Treasury.

The new 310-bed Papworth hospital will be built on the Cambridge University Hospital Foundation site through a 30-year deal part funded by PFI. Construction of the new facilities is scheduled to start in 2015 with a view to complete by 2018.

Around 45 per cent of the cost will be paid for through PFI; the rest funded from other public funding sources, including the Hospital Trust Fund and the Foundation Trust Financing Facility.

The trust will work with construction giant Skanska to further develop its plans and prepare a final business case. Designs for the new hospital were unveiled in December.

Chancellor George Osborne, said: “I’ve been a strong supporter of this move. As I said on a visit to Cambridge last week, there is great value in these two leading hospitals working more closely together and continuing to provide first-class medical care.

“By backing Papworth’s relocation to a medical research cluster we’re supporting the world leading science which is vitally important to Britain’s economic future.”

Papworth chairman John Wallwork, a former cardiac surgeon at the hospital, said the trust was “delighted” by the news.

Prof Wallwork added: “For many years we have been convinced that the right place for this world class institution to provide high-quality services for patients with heart and lung conditions from across the country is on the Cambridge Biomedical Campus. We now look forward to putting that vision into reality.”

As exclusively revealed by HSJ, the deal had been held up by the Treasury, despite the DH signing it off the deal last year.

The delay was understood to be due to the Treasury exploring the idea of moving some of the trust to nearby Peterborough and Stamford Hospitals Foundation Trust, which is crippled by debts related to a PFI deal.

The Treasury’s approval of the funding package raises the prospect of a merger between the trusts. This is unlikely to happen in the short term

A senior source familiar with the plans told HSJ in November that despite the trusts’ insistence that Papworth would remain independent, it was likely “the trusts will merge in the long term”.

The source told HSJ: “There are very good synergies between the two trusts and there would be savings on having one board rather than two.”

As part of its short-term plans, the trust is setting up a heart and lung research institute, in a joint venture with the University of Cambridge. This may not have happened had the trust not been able to secure the site next to Addenbrooke’s.