BT holds onto government deal

BT Group has held on to its government contracts despite planned cuts to public spending next week.

The telecoms group's shares rose almost 3pc to 147.4p, having fallen earlier this week in anticipation of a contract not being renewed.

However, all of BT's central government contracts remain in place after talks with Cabinet Office Minister Francis Maude.

The company said that the "talks focused on new arrangements designed to deliver efficiencies, many of them achieved by changes which will enable wider economies of scale while yielding genuine benefits to government," but BT did not give any financial details.

BT shares fell earlier in the week after a review of government spending by retail tycoon Sir Philip Green found fixed-line telecoms were the "best example of where the government fails to leverage its scale."

The stock rose on yesterday's news and was up almost 3pc at 147.4p.

The chief executives of the 19 biggest suppliers of IT and telecoms to the government, including BT, were called to a meeting with Francis Maude in July to discuss how contracts could be trimmed.

A number of the companies, including IT services firms Logica and CapGemini, have announced agreements. Others have said they will not release a statement on their own negotiations.

Chancellor George Osborne is due to publish a Comprehensive Spending Review this week, outlining how he plans to slash a record budget deficit of 11pc of GDP to almost nothing in five years.

Shares in BT rival Cable & Wireless Worldwide fell almost 20pc in July after it warned trading had been hit by a slowdown in the UK public sector.

JPMorgan said earlier in the week, that it reckoned BT would sign a new agreement with the government.

Source: The Telegraph, 16th October 2010

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