October 15, 2010 / 11:40 AM / 9 years ago

UPDATE 1-BT in deal with UK govt as Whitehall tigthens belt

* Says all UK central government contracts covered by deal * Says has agreed efficiencies, economies of scale

* BT shares up 2 pct, Cable & Wireless W’wide down 2.5 pct

LONDON, Oct 15 (Reuters) - Telecoms provider BT (BT.L) has managed to hang onto contracts with the British government after agreeing amendments with an administration grappling to plug big holes in the country’s budget.

“All of BT’s central government contracts were covered by these discussions and remain in place,” BT said in a statement on Friday after talks with Cabinet Office Minister Francis Maude.

“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,” the company said without giving financial details.

Shares in BT fell earlier this week after a review of government spending by retail tycoon Philip Green found that fixed line telecoms were the “best example of where the government fails to leverage its scale”. [ID:nLDE69B10C]

The stock bounced on Friday's news and was up 2 percent at 146 pence by 1125 GMT, outperforming a 0.5 percent weaker FTSE 100 bluechip index .FTSE.

Many companies are in talks with civil servants and ministers as Whitehall seeks to cut costs by centralising contracts that often vary from one ministry to another.

Finance Minister George Osborne is due to publish a Comprehensive Spending Review on Wednesday, outlining how he plans to slash a record budget deficit of 11 percent of GDP down to almost nothing in five years. [ID:nN10281623]

Shares in BT rival Cable & Wirelss Worldwide CWP.L were down 2.5 percent at 71.65 pence. The stock slid almost 20 percent in July after C&W Worldwide warned trading had been hit by a slowdown in the UK public sector. [ID:nLDE66J09A]

Reporting by Paul Hoskins; editing by Rosalba O'Brien

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