Lloyds Banking Group has won a competitive tender to deliver banking services for over 30 UK government departments and public sector bodies.
The contract, which is estimated to be worth GBP 99.6 million, was announced in August 2025. It is set to commence on a phased basis beginning mid-2025 and spans eight years, with an option for a four-year extension, potentially extending the contract to a total of 12 years.
The agreement covers a wide range of payment processing and transactional services on behalf of Government Banking, the shared banking service provider for central government and wider public sector customers. Key departments and agencies under the contract include HM Revenue & Customs, the Department for Transport, the Driver and Vehicle Licensing Agency, and the Ministry of Housing, Communities & Local Government.
In addition, Lloyds takes over ‘Lot One’ services from Barclays, ending a decade-long contract. The new contract for HMRC alone is valued at GBP 99 million, as part of an overall GBP 334 million, 12-year arrangement also involving NatWest and Citigroup.
Technological investment and transition strategy
Lloyds plans a phased rollout of services, beginning in mid-2025, to ensure a smooth transition and uninterrupted payment functionality for government departments.
A central reason behind Lloyds’ selection is its ongoing investment in advanced digital infrastructure, particularly the Gem platform. This system leverages modern technology to process high volumes of complex transactions while offering sophisticated analytics and self-service functionalities.
Furthermore, Lloyds has recently deployed generative AI via its Athena product and migrated AI infrastructure to Google Cloud, reinforcing its commitment to innovation in payments and financial technology.
Background and strategic implications
This contract marks a shift in the government’s banking service, ending Barclays’ long-standing role in handling HMRC.
In issuing the contract, Government Banking prioritised not only service quality and cost efficiency but also social value and environmental credentials, which carried notable weight in the evaluation process (10% and 7.5%, respectively).
