Suppliers on the Building Schools for the Future (BSF) programme may consider legal action as hundreds of millions of pounds of contract value evaporates overnight.
Research from TechMarketView predicts the BSF cancellation could result in total lost revenue of £3.7bn for the IT industry. Research director Tola Sargeant told CRN the affected suppliers would, inevitably, have to readjust growth plans and reduce their cost base.
“They have all spent considerable amounts of money and time and the margins on BSF deals were reportedly very thin to start with,” she said. “It will be interesting to see whether any of the suppliers take legal action for breach of contract.”
RM is projected to be worst hit, with TechMarketView projecting a potential eradication of £306m from an estimated total contract value (TCV) of £586m.
Sargeant advised that the private sector is the best option for growth in the short- and medium-term.
“RM does not have much opportunity to diversify outside of the education sector,” she added. “They have been bidding on 13 [BSF] deals – those costs will have to be offset.”
RM recently issued a statement conceding that projects “may be scaled back significantly”. But chief executive Terry Sweeney claimed the firm is “well-placed to adapt”.
Capita also predicted it will continue to perform well in the education arena, pointing to a deal with Newham College of Further Education, which was sealed this month.
A statement issued to CRN said: “Capita IT Services remains confident it will play a key role in delivering and supporting learning, irrespective of the curtailment of the BSF programme.”
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