Hospital managers are seeking private finance

The project, codenamed Vanguard, will help to end many of the overcrowding problems at Derriford Hospital in Plymouth.

It will provide an extra 300 beds and many existing wards will be modernised.

The South West Peninsula Health Authority had to approve Vanguard before it could seek funding from the private sector under the Government's Private Finance Initiative.

The scheme could be completed by 2007.

But the government is currently reviewing all privately-financed projects which may set back the start date of any building work.