Banking giant loses government contract as Lloyds set to take over
HM Revenue & Customs (HMRC) is set to replace Barclays with Lloyds Banking Group as one of the banks handling payments for UK government organisations. The move comes as part of a broader £334 million, 12-year agreement, the Financial Times has reported.
Lloyds is expected to secure a £99 million contract, joining existing providers NatWest and Citigroup, which will continue in their roles. The decision follows a previous campaign by environmental activists urging HMRC to cut ties with Barclays over its fossil fuel financing. The bank also faced scrutiny earlier this year when a three-day outage disrupted payments for millions of customers, including those making tax payments to HMRC.
A source close to Barclays said the bank’s removal from the contract was unrelated to environmental concerns. The lender will continue providing HMRC with merchant acquiring services outside of the government banking agreement.
HMRC to ditch Barclays as government’s bank in favour of Lloyds https://t.co/WWEUxW2XyN
— Finance News (@ftfinancenews) March 2, 2025
The contract is being awarded through a procurement process managed by HMRC on behalf of Government Banking, an initiative established in 2008 after the Bank of England ceased transactional banking services. Government Banking oversees the selection of private-sector banks to handle payments for public bodies, including the National Health Service.
An official announcement is expected later this month, following a standstill period that ended on March 3, during which banks had the opportunity to contest the decision. The contract is divided into three sections: general banking services, which Lloyds will now manage; a second lot remaining with NatWest; and a third lot, covering foreign exchange services, retained by Citigroup. The estimated contract values are £99 million, £166 million, and £69 million, respectively.
According to the Financial Times report, the new agreement significantly exceeds the £78.5 million value of the previous seven-year contract signed in 2015, which was later extended by three years. Barclays is estimated to have earned around £55 million over the full 10-year term.
“We always follow government procurement rules when awarding contracts, ensuring value for money for taxpayers,” HMRC said in a statement.
While HMRC is not obligated to change banking providers, it periodically reviews contracts to assess value for money, according to a source familiar with the process. Selection criteria include service quality and costs, with additional weight given to social value and environmental impact, which account for 10% and 7.5% of the evaluation, respectively.
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