A German delivery company has signed a ten-year deal to supply up to £3.7 billion worth of NHS equipment every year, the Department of Health (DoH) has announced.
DHL will buy in everything from bed linen to calculators and hip joints and sell them on to NHS trusts. The intention is that such bulk buying power will bring prices down, saving the health service up to £1 billion.
However, unions have reacted angrily to the news and have promised to ballot their members on strike action. Their main concern is for the 1,650 NHS staff who will become employees of DHL from next month under the deal.
Spending on medical supplies, dressings, stationery, staff uniforms, furniture, laundry and laboratory equipment represents a significant chunk of NHS funds, and the government believes that despite previous attempts to save money, further cuts are possible.
At the moment less than one third - £1.1 billion of the total £3.7 billion - spent in this area is done through the existing not-for-profit supply agencies, NHS Logistics and NHS Purchasing and Supply Agency (PASA).
But under the new contract, DHL will try to persuade those NHS trusts who are still negotiating with local suppliers to buy through them instead. DHL's products should be cheaper as it will be able to buy in bulk, and the firm aims to save the NHS £1 billion.
"This is a good deal for staff, patients and the taxpayer," said health minister Andy Burnham, saying savings would be reinvested in patient care.
He stressed that NHS Logistics staff, who will become private sector employees from October 1st, would enjoy at least the same working conditions and pension arrangements as they do at the moment.
"I acknowledge the good work that has been done by NHS PASA and NHS Logistics and the commitment of their staff to the NHS. But the NHS is not an expert in distribution or warehousing. There is a compelling case to bring in a company which is," he added.
However, Britain's biggest public sector union, Unison, has condemned the new contract and vowed to fight it. Members working at each of NHS Logistics' five depots are being balloted for strike action, and the result is due next week.
"This is a very sad day for the NHS. The government has not listened to the workforce or to reason. Staff across the NHS will be watching this privatisation deal which will be viewed by many as symbolic of what's to come," said head of health Karen Jennings.
"Why break up a winning team like NHS Logistics and sell it off to a German parcel company like DHL? It makes no sense when there is no doubt that NHS Logistics is an NHS success story.We will fight back to keep these jobs in the NHS."