The Government has held secret talks over the financial turmoil facing a major contractor that could spark severe disruption to public services, i can reveal.

Concerns are growing about cash flow issues affecting French IT giant Atos, which has almost a billion pounds’ worth of UK government contracts.

The extent of the financial difficulties faced by Atos’s UK arm are not known but the French parent company admitted in April that it was facing a wall of debt amounting to €3.9bn (£3.3bn).

Secret internal Government documents, seen by i, warn of “severe implications” for the continuity of “critical” public services, such as benefits payments and NHS appointments, should the firm’s UK arm collapse.

The Government is scrambling to line up an alternative IT provider that could be called upon to provide these services for major departments such as the NHS, Home Office and the Department for Work and Pensions, i has learned.

The Cabinet Office has been working on contingency plans since February, with experts examining the extent of the supplier’s financial difficulties and how the delivery of “critical” contracts can be protected if it cannot recover, the documents show.

While the extent of Atos’s work in Britain’s public sector may be unknown to many, it includes the delivery of disability benefit assessments for personal independents payments (PIP), and running the technology behind the Student Loans Company and for NHS records in hospitals across the UK.

It also runs a critical and sensitive Home Office file sharing system, provides IT services for the Ministry of Defence and Ministry of Justice and runs critical software testing for His Majesty’s Revenue and Customs.

If the contractor’s financial problems hit its ability to provide services to the public sector, the Government is concerned there could be disruption to NHS appointments and the sharing of health records, as well as delays to the assessments that help determine benefit payments, court trials and tax refunds from HMRC.

The documents reveal that the Government recruited leading advisory firm PwC to work with the Cabinet Office on a risk assessment project codenamed ‘Project Aztec’.

PwC was asked by the Cabinet Office to assess the likelihood of the contractor surviving its financial difficulties, and if it does not, what the impact of its collapse would be on the running of key services in the public sector.

The French company at the centre of the crisis is not named in any internal Government documents, but the parent company, based in Paris, is referred as ‘Aztec Group’, while the UK subsidiary is codenamed ‘Aztec UK’. i has been able to establish that the firm referred to is debt-laden French tech group Atos.

A spokesman for Atos told i that he could “neither confirm or deny” the firm was at the centre of Project Aztec.

Data provided by public sector contract information website Tussell, shows that since 2016 Atos has invoiced the government just over £6bn for services.

A spokesman for the Cabinet Office declined to name the firm known within Government as Aztec, but said: “We undertake regular reviews of suppliers and on occasion will undertake further due diligence to ensure public services can be maintained in a variety of scenarios.”

The firm is a multi-million pound sponsor of the UEFA Euro 2024 tournament and the official tech partner of the 2024 Paris Summer Olympics despite its financial problems.

In April, the French government announced it would come to the aid of Atos, offering a series of loans to help it through the following months.

The IT service company struck a deal with the French state and some of its creditors for €450m (£380m) in interim loans to allow it time “to identify solutions to stabilise its financial situation”, according to France’s finance ministry.

Atos contracts with the UK Government

The financial issues facing Atos, one of the UK’s main IT suppliers, could have “severe implications” for UK public services, according to internal Government documents.

Atos currently has more than 40 government contracts worth nearly a billion pounds.

Since 2016, the French company has invoiced the British taxpayer just over £6bn, according to analysis by Government contracts website Tussell.

The company’s largest contract was worth £1.5bn and was awarded to them by the National Employment Savings Trust to develop new systems to manage the group’s pension scheme. 

This deal ended, however, just two years into the 18-year contract in February 2023.

The group has a £124m deal with the Department for Work and Pensions, and is also involved in the delivery of Personal Independence Payment and Work Capability Assessments. However, its deal on this runs out in September.

Atos also has a deal worth up to £126m to run the technology powering the Student Loans Company, a £90m deal with His Majesty’s Revenue and Customs to provide critical testing of software, and a £72m deal to provide IT services to the Home Office.

As well as contracts with the Ministry of Defence, the Ministry of Justice and The Met Office, the group also runs technology services for NHS England and a range of NHS hospitals around the UK.

Last Friday, President Emmanuel Macron’s administration made a €700m (£589m) bid for the group’s data and cybersecurity division.

However, it remains uncertain if the French finance ministry will come to the aid of Atos’ UK operations.

A Cabinet Office source told i: “This is not a UK domiciled company. Any cost of preventing Aztec from falling into administration would be borne by the French government as this is a French company.”

Last week, the parent company decided to proceed with a financial restructuring plan led by French investor David Layani.

‘Project Aztec’

Secret government talks around the financial issues facing French IT giant Atos were mistakenly released into the public domain by the Cabinet Office in May.

Despite rapidly replacing the document on a Government contracts website with a blank page, i has seen the original.

A Cabinet Office source said: “The notice was published in error and has been republished in an appropriate form.”

The May document followed previous contracts that pointed to fears over Atos’s financial future, although the company’s name was absent and replaced with the codename “Aztec”.

In April of this year, PwC, which is being paid a fee of up to £500,000 for the urgent work, was asked by the Cabinet Office to assess the likelihood of ‘Aztec’ surviving its financial difficulties, and if it does not, what the impact of its collapse would be on the running of key services in the public sector.

Concerns around the collapse of the IT firm emerged in February, when the Cabinet Office first approached PwC to carry out the risk assessment. At first the work was codenamed ‘Project Inca’, but became known as ‘Project Aztec’ over the following months.

PwC, which is understood to be reporting to the Cabinet Office’s lead financial analyst Aislin Mageean, is understood to have won the lucrative work without a full tender process taking place.

On 15 May, another contract document was published that referred to “Consultancy support for a Special Situation (Project Aztec)”.

This document was initially published without redaction by the Cabinet Office, but then hastily removed from the Government’s website and replaced with a blank white page.

However, i has obtained the original document, which provides PwC with instructions to “review and comment on Aztec UK’s and Aztec Group’s short term cash flow forecast”.

Aztec UK is understood to be Atos’s London-based subsidiary, while Aztec Group is believed to be the group’s Paris-based parent company.

The contract also calls on PwC to look into restructuring options for the firm that were being considered by the French government, and whether this would include the financial rescue of the UK arm of Atos, which hold the public sector contracts.

The May document also sets out the Cabinet Office’s position on the search for alternative contractors to replace Atos should the UK arm of the company not be financially supported by the French government in any restructuring.

The contract states PwC should “review and comment on” the “likelihood that an alternate supplier could provide the services currently provided by Aztec”.

A further document, dated 10 June, spells out the extent of Government fears around the consequences of “Aztec” falling into a position where it can no longer fulfil its public sector contract obligations.

This revised contract stated: “The case has severe implications for the delivery of public services. The objective is to ensure continuity of critical public services.”