CSC will cut up to 500 staff following NHS IT debacle

CSC will cut up to 500 staff following NHS IT debacle

Announcement comes a week after £943m financial writedown

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Embattled IT services firm CSC has confirmed it will cut up to 500 staff, a week after it booked a £943 million charge on its failed NHS IT programme.

CSC, which is facing up to cancelled projects, investor lawsuits and an aggressive fraud investigation, said the NHS-related staff cuts represented nearly a third of its entire UK healthcare employee count.

Last year, the government officially cancelled the £12.7 billion NHS National Programme for IT (NPfIT), aimed at improving healthcare through patient administration systems and electronic health records.

The government had sought to rescope some of the work so that the lead suppliers on the programme would continue to supply and maintain systems in some trusts. But it has so far refused to sign a memorandum of understanding for CSC's future work.

Several high profile reviews heavily criticised CSC's work under its £3 billion contract in the NHS – including one report by the powerful Public Accounts Committee, which said the supplier's work had been so poor that the entire government needed to reconsider whether to give CSC any more work.

CSC said in a statement today that "regrettably" it had "started a formal 90-day consultation process" with staff, "which could reduce the number of people working on our NHS account by up to a maximum of 500 people". It vowed to minimise compulsory cuts, by redeploying some staff and offering others a voluntary redundancy package.

It described the cuts as "necessary mainly because we have now substantially completed many key development activities with NHS". The company's UK healthcare president, Sheri Thureen, told the Public Accounts Committee last year that the Lorenzo patient administration system had finally been developed enough for a faster national rollout. CSC had only deployed Lorenzo to three trusts in nine years.

CSC has been aggressively expanding its private and non-NPfIT healthcare business globally, as the NHS project encountered severe problems. It said it "remains fully committed" to the healthcare business.

Meanwhile, it is being sued by a large Canadian pension fund, which is a major shareholder. The fund alleges that the company painted an inaccurate and unfairly positive picture of its prospects on the NHS programme.

The company is experiencing severe problems on other fronts, including an accounting scandal and deepening financial problems in the Nordics and Australia.

Fraud allegations, levied by US regulator the Securities and Exchange Commission, claim CSC conducted DKK 500 million (£59 million) worth of stock manipulation through incorrect financial reporting.

CSC has maintained former employees were to blame for the problems, and in its attempts to solve the issues it has replaced many staff and vowed to tighten controls.

This month, it emerged that CSC had lost a large project in Demark mired by cost overruns and angry political arguments. The Danish national police dropped the project, known as Polsag, in which the cost had ballooned from the DKK153 million (£17 million) budgeted to DKK425 million (£48 million). CSC has not commented.

Several of its Danish projects are understood to have been impacted heavily by strikes among the company's workforce, over a pay dispute. One of its largest projects in Denmark, with the country's Tax and Customs Administration, is also encountering problems. A senior executive of that administration has accused the company of wilfully obscuring the truth about the project's progress.

It recently appointed former Misys boss Mike Lawrie as its new chief executive. Lawrie is known for his abilities to turn around companies.

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