UK government faces £17.5M shortfall from UKCloud liquidation

Cabinet Office letter also reveals department lost money on unfinished database project

The UK Cabinet Office has confirmed it is £17.5 million out of pocket after underwriting the official receiver of UKCloud, which went into liquidation in 2022.

In a response to the Parliament's public administration watchdog, Catherine Little, permanent secretary of the Cabinet Office, said the liquidation of the Brit-based public sector-focused cloud provider was expected to conclude in the second half of 2024.

She added that the government has underwritten the costs of the official receiver. "The original cost estimation was up to £40 million. The official receiver repayments and current level of Cabinet Office funding for the UKCloud liquidations is £17.5 million (£20 million day 1 funding less £2.5 million repayment to the Cabinet Office)," she said in a letter to the Public Administration and Constitutional Affairs Committee.

She added that, to date, there had been no known claims against the Cabinet Office indemnity.

Winding up the business seems to be taking longer than expected. In a written statement in May 2023, Jeremy Quinn, minister for the Cabinet Office, said the liquidation would conclude in the first half of 2024.

In October 2022, UKCloud and its parent Virtual Infrastructure Group were forced into liquidation, potentially affecting clients including central and local government, the police, the Ministry of Defence, the NHS, Genomics England, and the University of Manchester.

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.

Elsewhere in her response, the official insisted that a project to build a database needed for the government's £158 billion ($190 billion) property portfolio had not been "abandoned."

"The IT project has not been abandoned, although a previous supplier's contract was terminated due to their non-performance," she said.

The Office of Government Property (OGP) – part of the Cabinet Office – signed a contract with Landmark Information Group in October 2020 to build a new property database called InSite. However, "due to non-completion the contract was terminated in July 2022," she told MPs.

Apparently, there were "multiple attempts to secure improved performance from the supplier."

At the point of termination, the supplier had built an estimated 60 percent of the database, she said.

As part of the termination, the supplier reimbursed £300,000 to the Cabinet Office for "the cost of re-procurement and inconvenience, transferred work completed to date, transferred a number of software licences and provided a service to assist a new contractor."

The net total cost paid by OGP to the supplier was £585,000 on a contract signed for £1.3 million.

It will come as an embarrassment that the project is not yet complete as it is 18 months since the Public Accounts Committee (PAC) said the government had failed to get a grip on the management of its £158 billion ($190 billion) property portfolio because of a failure to replace an aging database.

The public spending watchdog said that in 2018, Cabinet Office announced InSite as its replacement. "The Cabinet Office told us that it considered commercially available systems in 2018 but believed off-the-shelf options, at the time, were not capable of receiving data from 160 different bodies across government," a PAC report said in December 2022.

But the bespoke system soon hit trouble in its development. Citing staffing problems, Landmark Solutions did not complete the InSite project, even when granted an extension.

In her missive, Little said "a robust lessons learnt exercise" had been carried out. "This identified a number of required improvements including the need for in-house technology expertise," she said.

Following this exercise, she said OGP procured a commercial off-the-shelf technology solution from Planon in June 2023, around five years after the project kicked off. ®

More about


Send us news

Other stories you might like