Fire and flooding at a BT building near Paddington station has blacked out Internet and telephone connections at over 400 exchanges around the UK and disrupted card transactions processed over the Sage Pay gateway for Lloyds Banking Group.
The incident, which occurred in the early hours of Wednesday morning, has knocked out telephone, mobile and ADSL comms for a large number of BT business and personal customers.
In a statement, BT says: "Following flooding at a BT exchange in the Paddington area, customers in parts of North and West London may be experiencing a loss of broadband and/or telephone service. Customers in other parts of the country may also be affected. We are currently assessing the impact of the damage but will only know the full extent of the impact once the site has been declared safe and our engineers are able to enter the building. We will issue a further update once we have more information on the incident."
Microblogging site Twitter was soon abuzz with status updates from online merchants and people unable to use their bank cards for transactions on the Web, and at Chip and PIN terminals and cash machines on the high street.
The Sage Pay network used by Lloyds Banking Group also reported problems authorising card transactions.
In a status update posted at mid-day, Sage Pay reported: "Please be advised Lloyds Cardnet and Halifax Bank of Scotland customers are currently unable to process transactions via the Sage Pay gateway."
This was followed by a further update two hours later: "We have received reports that this may be affecting other acquirers and customers."
The company scrambled to route transactions via temporary alternative channels, but by late afternoon was still reporting capacity problems and 'intermittent' authorisation issues.
In a statement, Lloyds says: "A small number of our customers have been affected by the incident this morning at a BT exchange in London. We are working with our partners to restore the service as soon as possible."
BT issued an updated statement later in the afternoon saying tens of thousands of its customers may be caught up in the outage.
"We are currently working on restoring services to customers, however as this is a complex incident we cannot accurately predict when all services will be restored."