A historic hospital is to close with the loss of 239 jobs.

The news was broken to staff at the private King Edward VII Hospital in Midhurst yesterday.

The decision was made by provisional liquidators BDO Stoy Hayward after a rescue package to safeguard the hospitals future fell through.

The hospital, which has been open for more than 100 years, treats 20,000 patients a year and about 60 to 65 per cent of these are from the NHS.

It is no longer taking on new patients and will stop providing clinical services from the end of next week. It is expected to close for good within six to eight weeks.

The news has devastated patients, staff and campaigners who have been fighting to keep the hospital open since it went into voluntary liquidation at the end of 2002.

The rescue package would have led to the Grade II listed main hospital building being converted into flats as part of a 300-home development by London-based Lincoln Holdings.

A new hospital was to be built in the grounds of the King Edward and run by the Swiss private medical company Capio Healthcare.

Planning permission was granted for the development by West Sussex County Council in May 2004.

However, negotiations between Capio and Lincoln Holdings have collapsed over disagreements on how the future development was to take place.

They were unable to agree who would be responsible for building the new hospital and who would cover the costs of maintaining the old one during construction.

Provisional liquidator Shay Bannon was appointed in 2002 to try to find a way to protect the hospitals future.

He said: "Today is a very sad day.

We have done everything we can to keep the hospital running under difficult circumstances.

"But without this commitment to rebuild a new facility and take over the provision of healthcare services to the local community we have been left with no alternative other than to implement a closure plan."

Hospital director of development Tricia Saunders said: "Everyone is in a state of shock. We are devastated.

"So much effort has gone into saving the hospital and now it has been lost.

We won all the battles but lost the war.

"This is going to have an impact on NHS patients who will now have to go elsewhere for treatment and have longer waits."

Tom Mann, chief executive of Capio Healthcare, said: "I am extremely disappointed that Capio and the other parties involved in this project have been unable to find an arrangement to guarantee the future of the hospital.

"Despite the efforts of all partners involved, we simply could not find a solution on some major issues in the development."

Stephen Friel, a director of Lincoln Holdings, said: "I have devoted two or three years of my life to this project and am bitterly disappointed we have not been able to come up with an agreement."