Fujitsu’s Role in Britain’s Post Office Scandal Could Have Severe Reputational Consequences, Analysts Say

Analysts express concern over potential reputational damage to Fujitsu due to its involvement in the U.K. Post Office scandal, emphasizing the fallout’s potential impact on government contracts and overall company image.

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Fujitsu’s involvement in the U.K. Post Office scandal, described as the “most widespread miscarriage of justice” in British history, has analysts expressing caution over potential reputational consequences for the Japanese IT giant. The scandal, involving a fault in Fujitsu’s Horizon computer software used by the Post Office, led to false prosecutions of more than 700 sub-postmasters between 1999 and 2015. Despite the acknowledgment of the software fault, sub-postmasters had not received adequate compensation for the damages incurred.

The fallout from the scandal has been reignited following the airing of a TV docudrama, prompting the British government to introduce legislation exonerating convicted sub-postmasters and allocating £1 billion ($1.27 billion) in compensation. Fujitsu could be pursued if an ongoing inquiry determines its responsibility.

While Fujitsu shares initially dropped after European co-CEO Paul Patterson acknowledged a “moral obligation” to compensate Post Office victims, they have since recovered. The company’s shares are down around 2% since the beginning of the year.

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Analysts warn that the fallout from the scandal could extend beyond financial implications, affecting Fujitsu’s reputation and potential future government contracts. Tim Morse, founding partner of Asymmetric Advisors, suggests that while Fujitsu may not bear the entire burden of the £1 billion compensation fund, it could face reputational damage, becoming less favorable for government contracts.

Members of Parliament on the Treasury select committee have called for the public disclosure of details regarding contracts awarded to Fujitsu since 2019. Replacing Fujitsu in U.K. government contracts could be expensive, given the company’s strong presence in government IT projects.

Analysts emphasize the potential severity of reputational consequences for Fujitsu, expressing surprise at the relatively “tepid” reaction in the stock price. Mio Kato, founder of LightStream Research, highlights concerns over the length of time the issues persisted and the delayed response to evidence of problems in the Horizon system. Kato suggests that Fujitsu’s clients may have significant concerns about the allegations, impacting the company’s image in the short to medium term.

While the case has not yet attracted massive attention outside the U.K., analysts remain cautious about the potential negative consequences for Fujitsu as the fallout continues. The company may face challenges in addressing concerns related to the Horizon system and could experience increased scrutiny regarding its quality control measures.