The British Council will be stripped of its role in running the £110m Turing student exchange scheme and replaced by the outsourcing firm Capita, the Guardian has learned. The decision, which has yet to be made public, has shocked higher education insiders, who fear the loss of the British Council’s long experience with international educational exchanges. The council has helped hundreds of thousands of young people find work and study placements abroad. The Turing scheme, announced in 2020 by Boris Johnson, replaced the EU’s Erasmus student exchange scheme after the UK withdrew after Brexit. Now the British Council is to lose its role as lead partner after Capita undercut its bid for the government’s tender. The tender lists the contract as worth up to £7m, to administer funding of £110m, including administration costs. Capita is said to have bid well below the £7m ceiling. Losing the contract will be a financial blow for the British Council, which is already absorbing staff cuts and office closures as a result of income lost during the pandemic and reductions to Foreign Office funding. The council said it was “continuing to work through the implications of the decision”. The British Council said: “We are proud to have launched the Turing scheme in February 2021 and supported £98.5m of grant funding in the inaugural year of the Turing scheme, including 41,024 participants, of which 48% are identified as coming from disadvantaged backgrounds.” Hiring Capita is the latest example of the government’s efforts to award contracts to outsourcing companies. Capita has been one of the major beneficiaries of the policy, despite criticism of its high-profile failings involving army recruitment as well as in back-office administration in NHS England. A Department for Education spokesperson said: “The Turing scheme is creating life-changing opportunities for over 40,000 students to work and study across the globe this academic year – with nearly half of all placements going to those from disadvantaged backgrounds. The government has committed to funding the programme for a further three years, including with £110m for the next academic year.” The DfE recently took the contract for administering the national tutoring programme for schools from the Education Endowment Foundation and awarded it to the multinational consultancy Randstad. This week, MPs heard that only 43,000 pupils had received tuition so far this year, compared with Randstad’s target of 524,000. The British Council has been helping administer the Erasmus scheme since 2007, and since 2014 has administered the successor Erasmus+ programme. When applications for the Turing scheme opened in March, the government said the British Council and Ecorys UK, an economics research consultancy, would continue to administer the scheme as a consortium, with an emphasis on attracting young people from disadvantaged backgrounds. But in July the DfE said it was “inviting the market to participate in engagement” and issued a tender to administer the scheme until December 2023, “to award a single contract for delivery of the services across four nations of the UK”. The British Council said it would continue administering the Turing scheme until the end of March 2022. “The British Council and Ecorys will work closely with Capita to ensure a smooth transition. All current and planned mobility activities will go ahead uninterrupted, and there will be no gap in service,” it said. Capita will be helped by organisations such as the Confederation of School Trusts, the Association of Colleges, the Sutton Trust and the Association of Commonwealth Universities, which has experience administering student scholarship schemes. They will have a limited role according to the tender documents, which state: “The [DfE] will require a single legal entity to enter into the contract with it. Sub-contractors are permissible, but the authority will not accept bids from consortia proposing joint and several liability for delivery.” The documents also say funding for the scheme could vary: “The supplier will be required to ensure systems and processes delivering the services are sufficiently responsive to manage a higher or lower budget for the future Turing scheme.” The British Council, the equivalent of France’s Alliance Française or Germany’s Goethe Institute, is the UK government’s cultural arm and educational ambassador. Earlier this year, it was forced to close 20 offices across the world, as part of a restructuring programme after cuts to the Foreign Office’s aid budget and the loss of income from language tuition and exams during the pandemic. A Capita spokesperson said: “Following a competitive procurement process, we are delighted to have won this contract to administer grants for the Turing scheme. We look forward to working with the DfE and our partners to enable students from all backgrounds to access global work and education opportunities.”