UK Bank’s Tech Overhaul Plunges Further into Crisis, faces Billions in Additional Costs
A troubled technology transformation project at National Savings and Investments (NS&I), a UK state-owned bank, is now £1.3 billion over budget and facing potential further setbacks, exceeding HM Treasury expectations. The issues raise further questions about the government’s ability to effectively manage large-scale IT projects.
The project, known internally as Project Rainbow, aims to modernize NS&I’s infrastructure, reduce running costs, and transition to a self-service digital model. However, a revised plan from systems integrator Capgemini has revealed the program’s deepening woes.
Speaking before a Parliamentary committee this week, Dax Harkins, chief executive of NS&I, admitted he could not guarantee the project would not face further setbacks. He indicated that extending the contract with current supplier Atos, set to expire in 2028, might potentially be necessary. “We are working thru the first version of the integrated plan we hoped would give us that [assurance],” Harkins stated.”I can tell you now that [plan] goes beyond March 2028 and it goes beyond our cost profile, and we are working to improve that.”
NS&I, which manages £240 billion in customer investments, maintains it has the resources to deliver the plan. Though, a finalized, on-budget solution remains elusive. “We’ve got some options to bring that [cost] in that we’re working through at the moment,” Harkins explained. “But HM Treasury have been really clear. We need to get an option to work within the budget. We just don’t know the makeup of that.”
The national Audit Office (NAO), a public spending watchdog, earlier this year heavily criticized the NS&I transformation program, which encompasses new customer technology and a new banking engine.The program initially launched in 2020 with the intention of replacing a 20-year outsourcing deal with Atos by dividing the work into five separate contracts.
Though,the relationship with Atos has proven remarkably persistent. A contract initially awarded in 2014 was extended without competition in 2021, 2024, and again to 2028, resulting in an additional £474.4 million for the French IT services company. The total program cost is now projected to reach £3.0 billion by 2030-31, a £1.3 billion increase compared to the original 2020 business case, according to the NAO.
The involvement of Capgemini,awarded a £48 million systems integration contract in July,is intended to help course-correct the project. According to Matthew Smith, the transformation program’s senior responsible owner, “We have never had that before,” referring to the collaborative effort between NS&I, Capgemini, and other suppliers.
Cost-cutting measures are under consideration, including possibly bypassing the growth of a new website and mobile app directly linked to the existing banking request. “It’s one of the initiatives that we’re looking at to bring that plan forward to actually not incur that nugatory cost and time of building to the legacy, but to build to the new capabilities of the new banking engine first,” Smith explained.
However, the NAO report highlights that replacing the core banking engine itself carries “an extremely high level of risk.” The continued reliance on Atos is particularly concerning, as the company was awarded a £474.4 million ($612 million) contract without competitive bidding to modernize the core banking engine, alongside providing payment, reporting, and business-to-business services through March 2028.
The decision to award the contract to atos without competition was justified by NS&I due to the complex interdependence of the existing NS&I core banking platforms and the potential for notable disruption to customers if the system were to be dismantled and rebuilt concurrently with the new core banking instance.
The Atos contract includes an option for a one-year extension, pending approval. This prospect extends a relationship between NS&I and Atos (previously siemens) that began in 1999, potentially reaching a three-decade duration with no clear end in sight. The ongoing saga underscores the challenges of large-scale public sector IT projects and the critical need for robust oversight and effective risk management.
