PracticePeople In PracticeAccountancy Age exclusive: Customs’£500m PFI deal falls apart

Accountancy Age exclusive: Customs'£500m PFI deal falls apart

Customs & Excise's £500m private finance initiative deal with ICL has been derailed after the IT services company's bank pulled the plug .

The 10-year deal broke down just 24 hours before the company was due to begin replacing the entire computer and telecommunications network for Customs.

As part of the deal, Customs was due to install the recently released Windows 2000 in all Customs offices and 250 Customs staff were to be transferred to ICL.

The breakdown of the deal comes as a severe embarrassment to ICL’s attempts to become the leading integrator of Windows 2000 in Europe, an ambition it outlined last month.

It is understood ICL’s bank, the Bank of Tokyo Mitsubishi, which is financing the deal, withheld consent for it to take place because of fears over the risk involved.

ICL, a global IT services company, designs, builds and operates information systems and services for customers in the finance and government, markets. Important customers include the Inland Revenue.

An official statement by Customs, issued to Accountancy Age, said: ‘We were told some 48 hours before the transfer of undertaking that ICL’s bankers, the Bank of Tokyo Mitubishi, had withheld consent for the transfer to take place. The transfer has not therefore taken place and the staff and assets that would have been transferred remain with Customs & Excise for the time being.

‘The department was ready to proceed to TOU. ICL were not. Although this is disappointing, not least for the 250 staff who were expecting to be working for ICL, we are assured the problems are not serious and we look to ICL to resolve them quickly.’

However, it is feared the deal, originally signed last September, will not be resurrected until June at the earliest. The company has hoped to roll out Windows 2000 within Customs by that time, though that is now unlikely. It could also throw into jeopardy the expected completion date of the deal that had been set for next summer. But an ICL spokeswoman said: ‘We hope to have the situation resolved in five to six weeks.’

The embarrassing shelving of the Customs deal follows a dispute between ICL and South West Water which resulted in an out-of-court settlement.

The company was working on a £2m contract with the water company to install software. However, the project collapsed and ICL was sued for misrepresentation.

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