THE FIRM at the centre of the Olympics security shambles has lost its contract to run a jail and failed to win any further prison contracts it was bidding for, the Ministry of Justice has said.

G4S, which failed to provide enough guards for the London 2012 games, will stop running the Wolds prison in East Yorkshire and it will return to the public sector from next year.

Competitions to run Northumberland prison and the South Yorkshire group of jails - Lindholme, Hatfield and Moorland - will now move to the final stage, with contracts likely to be awarded next spring, the MoJ added.

The competition process for the four prisons "produced a compelling package of reforms for delivering cost reduction, improvements to regimes and a working prisons model in these prisons", the MoJ said.

The competition process will continue for these with the three remaining bidders, Sodexo, Serco and MTC/Amey.

But this was not the case for the Wolds prison in East Yorkshire, which is currently run by G4S; Coldingley prison in Surrey; Onley in Northamptonshire, or Durham jail, the MoJ said.

Campaigners welcomed the announcement that Durham Prison is to remain in the public sector.

The Government had been offering a £340m contract to manage the Victorian Category-B jail in the heart of the city, for just over 15 years.

Durham City MP Dr Roberta Blackman-Woods said: “Both the Durham Prison and I am extremely relieved at this outcome - which is going to mean that the management and the running of the prison stays in the public sector and they are going to outsource support services.

“It is quite challenging what they are being asked to do. So, although we are relieved they are staying in public sector, actually the cuts they have to achieve over the spending review are quite substantial.”

The ministry also said it has found "further and faster ways of securing future cost reductions", with all public sector prisons "obliged to make additional efficiency savings".

Collective savings will also be made by putting services such as maintenance and resettlement services out to competition, the MoJ said.

Overall these changes should save £450m over the next six years, the MoJ estimated.