ALEX BRUMMER: Fujitsu takeover led to Post Office Horizon scandal

Back in 1968, Britain looked to be on the cusp of a computing revolution. Some 56 years later, it is hard to credit, but the British company at the core of what is now Fujitsu – whose Horizon system sparked the Post Office scandal – was a contender to become the world powerhouse in computing.

Britain’s ICL, which was later swallowed by the Japanese giant, was back then a serious potential rival to IBM of the US.

Instead, it became a textbook case of failed industrial policy. Rather than making the UK a global technology leader, Fujitsu’s Horizon has become a byword for faulty, bug-infested systems with a terrible toll of human tragedy.

In the late 1960s, it was all very different.

Prime Minister Harold Wilson’s vision of a nation forged in the ‘white heart of technology’ was not just a crowd pleasing rhetorical flourish. As a gifted mathematician, Wilson was more than aware of pioneering work in computing by Alan Turing and the early adoption of the new technologies by commercial firms such as High Street caterer J Lyons.

At the Ministry of Technology, the Secretary Of State in charge, Left-winger Tony Benn, steered through the Industrial Expansion Act.

Using his new powers, International Computing Ltd, (ICL) was born out of a mega-merger of several smaller firms.

After a starry start, it spluttered and struggled. Meanwhile, in the United States, IBM went on to become a £126 billion colossus – the forerunner of the multi-trillion Silicon Valley giants it later helped spawn.

ICL, the pin-up for Labour’s new industrial policy, became synonymous with weak management, poor financial controls and failure.

Aa has been the case with so many great British inventions – Arm Holdings is the contemporary equivalent – command and control ended up in overseas hands.

The story of ICL and how it was swallowed by Fujitsu is a prime example of the low value successive British governments have placed on supporting UK science.

Short-term thinking, flaccid boards, ineffectual bosses, unthinking asset managers and neglectful mandarins and ministers have allowed countless technologies to slip into foreign hands.

Recent years have seen valuable aerospace, satellite, sonar, software and defence innovations – controlled by companies such as Ultra Electronics, Inmarsat and Aveva – fall under overseas control, not all of it friendly, with barely a red flag raised. No other G7 nation has been so careless.

Anyone puzzling as to how Fujitsu became the go-to technology firm for Whitehall panjandrums only has to examine its history. Its DNA and systems are uniquely British.

There should be no surprise that Fujitsu was company of choice when the idea of the modern, Horizon financial computing system for the Post Office was rolled out in 1999. Around 6,000 people are deployed in the UK.

In spite of Fujitsu’s role in the Horizon scandal system it has continued to land £4.9 billion of taxpayer contracts.

Some £3.6 billion of these deals were signed after a 2019 ruling which found the Japanese company’s software culpable in the sub-postmasters and mistresses scandal. These include with HMRC and the Treasury.

In its earliest days, ICL looked as if it would be a rare success for government-encouraged corporate engineering.

Its proprietary tech included the first transistor machines, the first computers to use core memory (now in the Cloud!) and the breakthrough 1300 series of computers. In 1981, as part of the effort to go global, it linked up for the first time with Fujitsu.

The Japanese relationship was seen as a cheaper route to acquiring components, including access to Fujitsu’s large scale integration technologies of the kind later to be deployed at the Post Office.

ICL initially thrived as a standalone computer champion winning early contracts with the Post Office, the Inland Revenue, the Department of Work & Pensions and the Ministry of Defence. It was regarded as uniquely capable because of its ability to accommodate new software without the need for extensive re-investment.

In 1984, it was acquired by the UK’s Standard Telephones and Cables (STC).

It remained at the forefront of innovation and was a pioneer in small business systems.

But STC stumbled, capital was in short supply and despite several injections of taxpayer funds it found it ever harder to compete with IBM and US rivals.

Stealthily, as ICL needed more resources, Fujitsu became the main funder. The Japanese bought an 80 per cent stake for the bargain basement price of £740 million in 1990.

U nder the leadership of Sir Peter Bonfield (who went on to become chief executive of a privatised BT) ICL forged on, becoming the biggest systems, computer manufacturer and software developer outside the United States.

By 1998, Fujitsu had gained full control. There was widespread expectation that it would return ICL to the London stock market with a bumper £5billion initial public offering. That never happened.

By 2001, it discarded the pioneering ICL computing and IT brand and subsumed it under the Fujitsu name. Barely a protest was raised.

Fujitsu went onto win countless UK government contracts.

But as is the case with all foreign ownership the transparency, accountability, governance and fiduciary duty which comes with UK public ownership simply was not there.

The Japanese firm may well face ‘financial sanctions’.

But no UK plc possibly could have ridden out such a scandal for so long, without a punishing fall in the share price, heads rolling, full disclosure and retribution.