Anglo-Dutch IT services group Logica is to cut 1,300 jobs as it wrestles with the aftermath of an awkward merger and increasing competition in its core markets.

Logica confirmed it would make a three per cent reduction in headcount as part of the newly unveiled business review initiated by new chief executive Andy Green; 500 UK staff will lose their job. In total the firm will shed 1,300 jobs, which it says will come largely from its "non-billable" staff – those in back office functions, rather than consultants.

"I am confident that this plan will allow us to outperform the market and revitalise Logica," said Green in a statement.

Green said that the cost-cutting programme would allow Logica to increase its investment in areas such as automated metering infrastructure and security, where it believes demand is strongest. It also promised a renewed focus on growing its UK commercial business.

The business review which Green instigated when taking the helm at Logica in January 2008, concluded that "Logica's overhead structure is high compared to industry peers".

That explains the need for cost cutting, but it also glosses over one of the chief threats to Logica, namely the growing influence its Indian offshore services rivals.

Logica has promised to invest around £10m over the next two years in developing its blended delivery model, which would offer offshore and nearshore capabilities.