The NHS' National Programme for IT (NPfIT) has suffered a blow after a multi-million pound contract with IT provider Fujitsu Services was terminated.

It was terminated after negotiations between Connecting for Health, the body in charge of updating the NHS' IT system, and the technology company broke down.

The contract was reported to be worth £895 million, which would have come out of Connecting for Health's £12.7 billion budget.

A spokesman for the Connecting for Health said: "Regrettably and despite best efforts by all parties, it has not been possible to reach an agreement on the core Fujitsu contract that is acceptable to all parties."

Fujitsu Services added that there appeared to be no prospect of an acceptable conclusion.

According to a Telegraph report, Fujitsu would have been one of three main suppliers of the new IT system with its remit covering the south of England from Kent to Cornwall.