Lloyd's run-off vehicle Equitas has this week signed a deal to pass the management of its IT department to beleaguered outsourcing specialists IT Net.

The deal is worth £35m over four years and includes 140 staff with IBM, Unix and internet skills.

But just two days after publicising the contract, IT Net learned it was losing one of its biggest clients: Hackney Borough Council in London.

The council said it had decided to terminate its contract with IT Net because of “significant failures by the company to deliver effective service performance”.

The news caused IT Net's share value to plummet to a 12-month low of 352.5p – 112.5p lower than the previous day.

Equitas will pay IT Net £13m in the first year for the provisions of applications management and development services and IT operations, including desktop, server and mid-range systems support.

These services will be delivered from two sites in London and Farnborough, Middlesex. The full service went live on October 1.

But Equitas denied that IT Net's problems with Hackney council were a problem.

Finance director, Jane Barker, said: “If you go back through the press cuttings, you can see that IT Net and Hackney Council have been having issues for a long time.

“But we have also talked to some customers who were very satisfied with IT Net. We are pleased to have signed up with them and, so far, everything is working well.”

The bulk of IT Net's business – £38m of a £76m turnover – is with public sector organisations.

The outsourcing company began as Cadbury Schweppes' IT department and floated in 1998. Its customer list includes BAA, Forte, The Law Society, The Post Office, Travel Inn and several councils.