A planned merger of two acute foundation trusts has been called off after one of the providers involved decided merging did not offer the best chance of stabilising either finances or services.

The intention to merge the Royal Surrey County and Ashford and St Peter’s foundation trusts was first announced in May 2014, and would have created a provider with an annual turnover of around £600m.

The plans were “paused” in March this year, to address the Royal Surrey’s deteriorating finances. The trust finished 2015-16 with a £10.2m deficit, and its quarter one forecast for 2016-17 was for a deficit of £7.9m.

The Royal Surrey has now announced that the merger will not go ahead.

In a joint statement the trusts said that at the end of quarter two 2016-17, the Royal Surrey carried out a self-assessment in relation to the proposed merger. It found that the best opportunities to improve care and deliver efficiency savings lay in the Surrey Heartlands sustainability and transformation plan and “wider healthcare networks”, rather than the merger.

Both trusts are partners in the Surrey Heartlands STP.

The statement said: “Therefore, after careful consideration, Royal Surrey’s board has concluded that it no longer believes merging offers the greatest opportunity for long term financial and operational stability and feels that it is unlikely that this position will change in the foreseeable future.”

Ashford and St Peter’s has not carried out a self-assessment. However, its board has accepted that the merger will now not proceed.

Plans are being developed to network some clinical services across a wider geography than that covered by the two trusts.

For example, Frimley Health Foundation Trust board papers say stroke services may be consolidated at Frimley Park, at the expense of the Royal Surrey.

Frimley Health’s September board papers moot a “possible closure” of the Royal Surrey’s hyper-acute stroke unit in Guildford, which could increase Frimley’s workload by up to 60 per cent.