BT Global Services takes £1.5bn hit

Tags: A BT Community Information iS London Mental Health South UK

14 May 2009

BT has said it will cut another 15,000 jobs this year, equivalent to 10% of its UK workforce, as it reported an annual loss of £134m.

The job losses follow 10,000 previously announced. So far, the axe has fallen on contractors and agency staff.

BT's problems centre on its Global Services Unit, the division responsible for its NHS IT contracts. BT said it had taken a near £1.5bn write-down at this unit, which is now being restructed at a cost of £700m.

There will be an initial £280m restructuring charge, with further restructuring charges of £420m over the next two years.

The write-down follows a review of all the corporate IT services contracts held by the division. Problems at Global Services are said to centre on the contracts with the NHS and Reuters.

BT admits it has overestimated the profitability of many of its largest IT contracts and has been forced to write-down their value by hundreds of millions of pounds.

"Three out of four of BT's lines of business have performed well in spite of fierce competition and the global economic downturn," said BT chief executive Ian Livingston.

"However this achievement has been overshadowed by the unacceptable performance of BT Global Services and the resulting charges we have taken."

The firm also said that it would be making pension contributions of £525m in each of the next three years.

In its annual report the company said of its NHS contracts: “We continue to make progress on our NHS National Programme for Information Technology (NPfIT) contracts.”

The company said that the contract covering work in London had been extended to take over the running of IT systems at eight acute hospitals in the South of England, where BT will also implement systems in a further four acute trusts.

The company added: “We will also implement 25 new systems in community and mental health trusts in the region, building on our success in London, where the roll out is now 70% complete.”

Jon Hoeksma

Readers Comments

Only CSC appear to be remaining healthy

14 May 09 18:44

What are they doing right? What can we learn?

With BT's woes partly attributed to the 'toxic' nature of the NHS NPfIT contract (totally overshadows everything else at least) and Fujitsu and Accenture now out of the game, it really begs the question what are CSC doing differently that they themselves aren't suffering in the same way? Or is that news around the corner as well?

The news of thousands more contract and agency staff being laid off (which must affect Global Services hugely and the NHS contracts directly) must also be a further bombshell for CfH/DH in London given the 'must show substantial progress by November' message delivered in Harrogate last month.

What we are seeing now is IMHO the (sadly) predictable results of the programme set in motion by Richard Granger in 2002 with the fallacious belief that transferring risk to suppliers (not completely upheld anyway) was somehow the guarantee that things would go well. This was the biggest error of judgement amongst many made at the time and BT may yet bail out now that they have taken the write down of over a £billion. The view in 2002 was that existing suppliers were under capitalised and therefore unable to deliver.

It appears as predicted that being 'better' capitalised provides no guarantees either. I'm sure that US policy makers will be viewing this news with suspicion after the recent £20bn e-health package announced as part of the recovery plan.

What a waste.

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