Logica, the troubled IT services group, is to cut 1,300 jobs, including 500 in Britain, and double its offshore operations as part of a £110 million plan to revive the business.

The company said yesterday that it would shed 3 per cent of its overall workforce while increasing its offshore staff from 3,450 at present to 8,000 by the end of next year. Back-office functions, such as finance and human resources, will be hit in the UK.

Logica said that it would close some of its 30 British offices, which include regional bases in Reading, Staines and Leatherhead in the South East and Edinburgh and Glasgow in Scotland, but a spokesman said that it was too early to say which would be shut.

The group also plans to hire more consultants, increasing their number from 2,500 to 3,500 by 2010, while aiming to double the number of big accounts that it has.

Most of the offshore expansion will take place in India, Morocco, the Philippines and Eastern Europe, taking advantage of lower wages. The company is hiring 300 people a month in India and it plans to open a new site in Madras in the fourth quarter of this year.

Andy Green, Logica’s chief executive, who has been reviewing the company since joining in January from BT, said that the overhaul would cost £110 million to implement over the next two years, resulting in £80 million of cost savings from 2010. He said: “We have set out an exciting programme for growth, built upon our great strategic position. We will be increasing our investment in growing the Logica business, funded by a cost-cutting programme that will reduce overheads.” Logica vowed to lift its profit margin by half a percentage point in 2009 and by between half a point and one percentage point in 2010.

However, the group’s overhaul received only a lukewarm welcome in the City, with shares falling 3 per cent to 111p, as analysts feared that the restructuring would not go far enough.

Downgrading the stock to “sell”, with a 94p target, George O’Connor, of Panmure Gordon, said: “As always, implementing the turnaround is the hard part and more likely than not [it] will be punctuated by bad news and further restructuring costs.”

Julian Yates, an Investec analyst, said that the targets were relatively undemanding considering the significant cost. He set a target price of 102p, with “hold” advice, adding: “We believe that there is execution risk and a reliance on a relatively good market backdrop to achieve these targets.”

Shares in Logica have been hit badly in the past year. Between last May - when delays on a commercial contract forced the group to make a £15 million provision and cost Martin Read, the chief executive, his job – and March this year, the shares lost more than half their value.

In February Mr Green said that Logica had dropped “CMG” from its name, six years after Logica and CMG merged after the dot-com boom. Investors are to vote on the name change at the annual meeting in May.

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