The health service is facing big compensation claims after admitting yesterday that failure to spot a millennium bug computer error led to incorrect Down's syndrome test results being sent to 154 pregnant women.

The mistake - one of the most serious effects of the bug which many dismissed at the time as an overheated scare - was described in an NHS report as "a simple error which should not have happened".

Investigators in Sheffield admitted two terminations were carried out as a direct result of the mistaken test reports. Four Down's syndrome babies were also born to mothers who had been told their tests put them in the low-risk group.

The inquiry also recommended that the computer model which failed should be re-examined by the NHS and replaced if it was considered too simple. The report called for extra training for staff in more sophisticated monitoring of Down's syndrome risks.

The investigation followed the belated discovery of the computer error at the Northern general hospital in Sheffield, where tests on samples from the women started on January 4 last year, less than a week after the NHS's intensive anti-millennium bug preparations for 2000 were completed. The team's 112-page report found that a dating mistake continued until tests carried out on May 24 that year, when it was finally spotted.

The report, commissioned by Lindsey Davies, regional director of public health, also found that checks and monitoring of the Northern general's PathLAN computer system had become complacent. It said: "In part, the fact that the service had run successfully for 10 years led to a degree of overconfidence in the processes used and the software which contributed to the warning signs being overlooked and accommodated as acceptable errors."

The blunder affected women from South Yorkshire and the east Midlands, an area served by nine hospitals which sent samples to the Northern general. Professor Davies said yesterday: "It was very specifically related to the millennium. When the computer got to 2000 it just didn't calculate the mother's age correctly.

"When that information was fed into the test's calculations, the resulting risk level was wrong. It just demonstrates how careful you have to be at every stage in the system."

The tests were not a guarantee against babies proving to have Down's syndrome, but placing in the high risk category would have given mothers the opportunity to have an amniocentesis test.

Prof Davies said: "When the results started to look strange the hospital staff just thought it was a different mixture of women coming through, rather than the computer software. The hospital NHS trust was reassured - they thought everything was fine.

"But this was a simple error that shouldn't have happened."

Andrew Cash, chief executive of Sheffield teaching hospitals trust, apologised yesterday to all the women given misleading results. He said: "They were put in the unacceptable position of being given reassurance by the test and then having that taken away from them. We are already taking steps to ensure to the greatest possible extent that errors of this nature cannot happen again, and these will now be reinforced by the recommendations in the report."

The trust has replaced computer laboratory software at all Sheffield hospitals since the error was discovered.