A group of IT suppliers is set to lose as much as £3.7 billion in potential revenues, after the government put an end to the Building Schools for the Future programme.
The figure was calculated by TechMarketView, which also predicted that up to 44 percent would be wiped off the value of existing contracts, with RM, Northgate, Redstone and Capita potentially losing out most.
The programme, worth £45 billion overall with about one tenth allocated to IT, aimed to overhaul and modernise school buildings across England.
Tola Sargeant, research director at the analyst house, predicted that in many cases “suppliers are set to lose revenue from contracts that were signed several years ago”, even though a number had “successfully delivered” IT systems to schools.
Sargeant warned that unless the contracts were profitable in each school, the cancellation “could have worrying consequences for suppliers’ profit margins, particularly given the high bidding costs and reportedly thin margins on BSF deals”.
She noted that it is “still possible” some projects will go ahead. But, she said, paying teachers’ salaries would naturally have to take priority and IT spending will be “severely limited”.
RM, a supplier that had an estimated contract value of £586 million, could lose up to £306 million of potential revenues or 52 percent of its contract, TMV estimated. Northgate, which had an estimated £205 million deal, could lose 57 percent, or £117 million of this.
The next supplier facing a loss of expected revenues could be Redstone, TMV estimated. The company was understood to have a deal worth £191 million, but could lose £109 million of this. Capita, which has a deal thought to be worth £217 million, could lose £79 million. Other suppliers to lose out include Civica, Agilisys, Dell, VT and MASS.
Northgate did not comment, and Redstone had not commented at the time of writing. A Capita spokesperson said in a statement that the company was "well-positioned to continue successfully delivering programmes whichever model the government agrees". Earlier this month, the company signed a £4.4 million contract with Newham College of Further Education to provide an IT transformation service.
RM said it had financially closed 14 projects but warned that seven projects were due to be reviewed. Chief executive Terry Sweeney told investors: “We have strong relationships at individual school, local government and central government levels. With our strong position in the Academy market, we remain confident that RM is well-placed to adapt to changes in capital spending programmes.”