Siemens Business Services has been managing areas of Barclays' retail banking back office - including account closures, transfer of funds and administrative processing for direct debit and standing order instructions - since 2000.

Around 518 employees based in Glasgow and Beeston, Nottinghamshire work on the Barclays contract in addition to around 350 agency staff.

In a statement Barclays says it has decided not to renew the contract and will move the work in house when the current deal ends on 30 September 2008.

The bank says it does not "plan on continuing to base the current activity at the Glasgow and Beeston sites in the future" and staff have "been advised that once the activity is integrated back into Barclays, their roles will become redundant".

However under TUPE (Transfer of Undertakings Protection of Employment) regulations, the Siemens staff working on the contract are expected to transfer to the bank before being made redundant.

But in a move that could negate the need for a TUPE transfer, the two companies are in discussions about extending the current contract by 12 months.

Despite this, in a statement Siemens says: "Whatever the outcome, redundancies are unfortunately inevitable though we hope to achieve these on a voluntary basis and would always look for redeployment opportunities for our staff where appropriate."

The vendor says it is working with the Public and Commercial Services union to help minimise the impact on staff.

Last month Barclays disclosed plans to axe around 1800 technology jobs in the UK over the next couple of years, with the bank expected to offshore the work to centres in India, Hungary and Singapore.