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Government IT provider UKCloud goes into liquidation

Erstwhile national cloud hero drowns in unpaid debts

UKCloud and its parent Virtual Infrastructure Group have been forced into liquidation, potentially bringing an end to the ailing business.

As a British public-sector IT provider, UKCloud had central and local governments, the police, the Ministry of Defence, the NHS, Genomics England, the University of Manchester, and more as clients.

A notice from the UK government's Insolvency Service on Tuesday states that "winding up orders were made against" both UKCloud and its parent, and that a court has appointed the Official Receiver, Gareth Jonathan Allen, as liquidator.

Winding up orders are issued by the courts, at the request of one or more creditors, when it's clear an organization can't pay its debts and may need to be torn down and sold off to reimburse those owed money.

Allen has asked for Alan Hudson and Joanne Robinson of Ernst & Young LLP to be brought in as special managers to oversee the next steps.

"The Official Receiver will wind-down the affairs of Virtual Infrastructure Group Limited and UKCloud Limited in an orderly manner in accordance with statutory duties," the government notice reads. "The Official Receiver also has a duty to investigate the cause of the companies' insolvency and the conduct of current and former directors."

The Official Receiver also has a duty to investigate the cause of the companies' insolvency and the conduct of current and former directors

Allen is said to be "maintaining operations whilst the liquidation strategy is being developed. The strategy will consider the provision of services, transition of contracts and whether a sale is viable."

UKCloud, formerly known as Skyscape, posted a similar message on its own website.

It had three trading brands: UKCloud Health, targeting central health organizations; UKCloudX, focused on Defense and National Security customers; and UKCloud for local and central government, as well as private organizations.

Services included datacenter modernization, professional services, and a range of cloud services including Microsoft Azure, OpenStack, Red Hat OpenShift, VMware, disaster recovery as a service, security operations services, and private cloud for Oracle.

Signs that not all was well with UKCloud were evident in January when the loss-making business was bought by chairman Jeff Thomas, with further investment from BGF Group and Digital Alpha.

At the time, Thomas said funding would be provided to establish a "strong foundation on which to assemble a portfolio of innovative businesses promoting the ethical and sustainable use of data to drive positive change in our communities and economy."

"Organizations and governments increasingly share a belief in these crucial outcomes and I am deeply excited to unveil more information about our growth plans and new direction in the very near future," he added.

The purchase was said to mark a change in direction for the company towards working with global cloud providers, in addition to making investments in its own platforms and services. The UK government approved the buyout.

UKCloud, incorporated in 2011, was one of the first SMEs to benefit from Britain's efforts to get its public sector into the cloud. The biz withered in recent years as the biggest hyperscalers – most notably Amazon and Microsoft – hoovered up government contracts.

Reg readers may remember UKCloud filed its latest profit and loss accounts for the year ended March 31, 2020 in September last year. They showed a business that had swung to a loss of £17.4 million on revenues of £37.1 million following spending increases in sales, marketing, development, and platforms, coupled with a reduction in cloud usage by some clients.

UKCloud sought inward investment of around £30 million in 2021 to "generate sufficient cash from trading to offset capital expenditure and debt service costs" as well as providing working capital.

The fact that the business fell on hard times during the pandemic, when cloud providers and distributed services were thrust into the limelight, perhaps tells its own tale about UKCloud. This latest twist indicates that financial performance didn't pick up in the remainder of 2021.

We have asked UKCloud CEO Simon Hansford to comment, and will update this story if we receive a substantive response.

UKCloud was the only local provider to sign a Memorandum of Understanding with the British government to provide agreed discounts to public sector buyers. The others included Google, Amazon, Microsoft, IBM, and HPE.

A spokesperson for the Cabinet Office told The Register last night: "We regularly monitor the health of key suppliers and we have contingency plans in place to ensure the continuity of public services.

"The vast majority of departments which used UKCloud have already moved onto alternative systems.

"Those who remain on UKCloud will find alternative arrangements as soon as possible, while continuing to operate. We do not expect disruption to everyday public services."

The Insolvency Service sent us a statement: "The companies are in liquidation following the directors' winding up petitions. The official receiver will investigate the cause of the companies' insolvency in accordance with his duties."

It had nothing further to say at this point. ®

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