Monitor has instructed University Hospital of South Manchester Foundation Trust to appoint a ‘turnaround director’ following concerns about its finances, the regulator has announced.

The action follows an investigation which concludes there were “reasonable grounds to suspect the trust had breached its [provider] licence”.

The trust has agreed a raft of “enforcement undertakings” with Monitor in a bid to improve its financial performance, including a commitment to appoint a turnaround director. It will also review its leadership to examine the effectiveness of its board, according to Monitor.

The regulator launched its investigation into the trust’s finances in December, after a report by PwC flagged up concerns about its short-term financial outlook.

The PwC report pointed to increased private finance costs and potential pathway changes from a planned hospital reconfiguration in Greater Manchester as key risks and predicted the trust would post a deficit of up to £10m in 2014-15.  

Monitor also examined its performance in accident and emergency performance, following repeated breaches of the national target to ensure 95 per cent of patients are treated within four hours.

While the trust’s leadership review will consider the board’s effectiveness in responding to problems in areas such as A&E, Monitor has not taken specific regulatory action in respect of the breaches.

The regulator said the trust was “taking action to improve its A&E performance”, but said it would “keep this performance under review and… take further action if necessary”.

In a statement, UHSM admitted its PFI committments had contributed to its financial position but said its recovery plan would “see the trust return to good financial health within the next two years”.

“We are in the process of reviewing the trust’s board governance arrangements to ensure we continue to have strategic overview and robust governance to deliver our plans.”

The trust had received £12m from the health secretary to “significantly increase its A&E capacity”, its statement said.