Conflict of interest fear as Microsoft signs deal with Whitehall

Microsoft has signed a five-year product agreement with the British government as the Labour administration deepens its ties with the giant technology group, whose UK chief executive has just been appointed to lead an influential new industrial body.
Microsoft and the Crown Commercial Service, the UK’s biggest public procurement organisation, have agreed a memorandum of understanding giving public sector organisations access to Microsoft’s portfolio of AI-powered products and services.
The agreement follows the appointment of Clare Barclay, the boss of Microsoft UK, this month as chairwoman of the government’s new Industrial Strategy Advisory Council, which experts warned could raise concerns over perceived conflicts of interest given Microsoft is a major strategic government supplier.
Industrial strategy is a key part of Labour’s plans to grow the economy and will focus on eight key growth sectors, including digital and technology. The council will provide advice developed in partnership with business, trade unions and other stakeholders.
Microsoft is among a group of 39 key strategic private-sector suppliers, along with the likes of Oracle and IBM, which have a crown representative network to act as a focal point supplying the public sector. Microsoft’s crown representative is Jay Chinnadorai, who is also on the board of TechUK, the trade body.
Microsoft has been awarded 383 state contracts since 2018, according to a report last year by Tussell, the data provider.
Peter Smith, a procurement expert, former government adviser and author, said: “This illustrates a dilemma for governments in their dealings with key suppliers. Of course they want strong, collaborative relationships, and also need appropriate people to contribute in roles such as the one Barclay has taken. But this can lead to allegations of perceived conflicts of interest.”
Smith added: “Clearly, the public sector is going to buy from Microsoft, so this agreement in itself is understandable. And a more difficult situation would arise if for instance there was a dispute with Microsoft, in which case the government might find itself in a tricky position given Barclay’s role.”
Under the agreement with the Crown Commercial Service, an executive agency of the Cabinet Office, public sector organisations can, via their chosen procurement route, access cost savings on Microsoft 365, the Azure cloud platform, business applications, and for the first time, Microsoft 365 Copilot, which embeds generative AI into Microsoft’s suite of productivity apps.
The company said this would enable the automation of repetitive tasks and content generation, enhanced collaboration, efficiency gains, and improved public services.
Microsoft also plans to make events, workshops and certifications available for users across government, which it said would “drive the adoption of new digital skills and capabilities”.
The memorandum of understanding is a non-binding agreement and Microsoft has typically issued them every three years to allow the public sector access to discounts on Microsoft products.
The agreement coincides with an address on Monday from Satya Nadella, Microsoft’s group chief executive, and Barclay, 54, as part of Microsoft’s “AI Tour”.
Microsoft cited recent research from Public First, a consultancy, which found that accelerating the adoption of digital technologies could add £550 billion to Britain’s GDP by 2035.
In a statement alongside Barclay’s appointment to lead the Industrial Strategy Advisory Council, she said it would “play a central role in shaping and delivering” future growth.
A spokeswoman for the Crown Commercial Service said: “This memorandum of understanding will make it possible for public-sector organisations to access discounts on Microsoft products and services regardless of their size, saving money for taxpayers. It will be down to each individual organisation to procure for their specific needs.”
Daniel Bruce, chief executive at Transparency International UK, said: “While it is welcome that the government have secured a renewed commitment from Microsoft to competitive pricing, open contracting remains the surest route to deliver value for money to the taxpayer.”
Barclay, who has led Microsoft’s UK operations since 2020, was a non-executive director at the CBI, the business lobby group, when it was embroiled in a workplace misconduct scandal last year. The CBI has welcomed her appointment as “bringing a wealth of knowledge and experience”.