The 19 biggest service suppliers to the public sector are to meet with the government this week to analyse how and where spending cuts can be made.

A reported £800 million needs to be clawed back from the preferred outsourcing and IT suppliers, meaning IT contractors could see their work dwindle.

Firms including Capita, Serco, BT and IBM will discuss options with officials and could be told to shrink contracts in order to help reduce state spending.

"There should be a renegotiation of IT contracts across the board," said one response on an HM Treasury web page. "They are poor with regards to their costings matrix and rates charged.”

Government is not getting the best IT suppliers and fairer competition must be brought in, the commentator continued.

Public sector suppliers are going bust in greater numbers than this time last year, according to figures from accountancy firm Wilkins Kennedy.

It has warned that the spending cuts and delays in making decisions on projects that will go ahead are hitting firms which are already struggling with costs.