No small change: industrial relations in the finance sector

In the second of our series examining the state of industrial relations in major UK industries, we look at financial services and union campaigns to preserve job security above all else.

The retail finance industry has been in a state of flux for a decade. In retrospect, the industrial relations climate of 10 years ago reflected a relatively gentle contest between the unions' efforts to improve members' conditions and employers' desire to contain wage costs.

More recently, however, the unions have been occupied in round after round of "fire fighting", struggling to limit the effects on their members of repeated redundancy and restructuring programmes, as employers have adjusted to changing markets and patterns of consumer demand. Issues of pay and benefits have taken a back seat to job security.

From the early 1980s to the late 1990s, almost all unions lost members, and those in the finance sector were no exception. But while the advent of a Labour government in 1997, and the introduction of a statutory right to recognition, brought a halt to the decline in some sectors, figures in finance continued to fall.

In 2000 alone, union density in financial services fell from 30% to 27%, a loss of 35,900 members, according to a TUC study based on the 2001 Labour Force Survey (LFS)¹. At its creation in 1999, Unifi had 193,000 members: the figure is now nearer 142,000. Amicus MSF has experienced similar losses in its finance section.

"There's no definable evidence to say we are losing members because they are disaffected with the union," says Dave Fleming, head of Amicus MSF's finance section. "Historically, we were very involved in the field services and those have all closed at companies such as Pearl, Prudential and Royal London. We have had to replace those with recruits in the call centres and head offices."

Rory Murphy, deputy general secretary of Unifi, makes a similar point about wave after wave of rationalisation in banks and building societies, which brought staff cuts in traditionally highly organised high street branches. Meanwhile, employment growth has been in the call centres where unions
are weaker.

Nevertheless, Fleming says that his section's figures have been at break-even over the past two years. He says: "We took on 6,500 new members in 2002, based on a paying membership of around 40,000, and our density has gone up in some companies." Although Unifi recruited around 16,000 new members each year in 2002 and 2003, its membership totals fell slightly.

Unifi has signed 12 new recognition agreements in the four years since its formation, and Amicus MSF has gained recognition in a handful of organisations often through transfers of groups of members covered by the Transfer of Undertakings (Protection of Employment) (TUPE) Regulations. These include the 1,200 employees who moved to Churchill Insurance when it took over Prudential's general insurance business.

The traditionally union-shy credit card sector, with old companies such as American Express and newcomers such as Egg, is being targeted for membership expansion, but Murphy and Fleming agree that progress is slow. Fleming says: "It's very much a business of being outside leafleting. It's a very arduous and wearing process, but we are not going away."

In a sector where membership density of 40% in any one organisation is seen as relatively high, the unions have concentrated on building closer ties with major employers to give them a firm base to consolidate numbers.

In 2002, Amicus MSF signed a partnership and recognition agreement with Aviva (previously CGNU and trading in the UK as Commercial Union and Norwich Union) after the union absorbed the 10,000-strong CGNU staff association, giving it a total of 12,000 members out of 25,000 eligible staff. Amicus MSF also has a longstanding partnership agreement with Legal and General. Unifi, meanwhile, has partnership arrangements with the Cooperative Bank and Barclays.

Fleming rejects the common criticism of partnership deals as devices to neutralise unions, trapping them into giving up their industrial strength in return for warm words. "Our ability to organise, to communicate, to support members and to have a dialogue is superb in these companies," he says. But he qualifies the assessment in the case of Aviva, where the summary announcements of job cuts, he believes, are not entirely in the spirit of partnership.

Though partnership often circumscribes unions' use of industrial action - through commitments to external arbitration or other resolution mechanisms - both men insist that the unions will not sign away their right to take action. "We do have the industrial leverage, but we haven't had to use it much," says Murphy, arguing that to focus on the near absence of collective action in the sector in recent years is to ignore the work supporting individual members through disciplinary or grievance procedures, a crucial part of the union's role.

Fleming adds pragmatically that industrial action is bound to be rare because "density of membership is not high and these are white-collar workers; it's not part of their culture". Murphy says that use of ballots for action have become less rare and have often had the effect of making organisations soften unwelcome proposals.

Offshore banking

The largest campaigning issue for finance unions in recent years, and one bound up tightly with job security, has been the "offshoring" or outsourcing of jobs to low-wage countries. In 2003, Deloitte Consulting predicted that the world's largest financial institutions would move two million jobs to countries such as India by 2008, and 200,000 of those would move from the UK. Another leading analyst, Datamonitor, pitches its forecasts substantially lower at around 500,000 jobs relocated from western countries by 2007.

Fleming describes the estimated 10,000 UK call-centre jobs that have been exported to Asia so far as "a trickle". But HSBC has announced that it plans to transfer 4,000 jobs to India, China and Malaysia; Aviva says it will replace 2,500 UK posts in Norwich Union with Indian workers. Similar smaller-scale plans have been revealed by Abbey (formerly Abbey National), AXA, Friends Provident, and Royal and SunAlliance.

Amicus MSF cut its teeth in campaigning against offshoring following a proposal by the Prudential to move 850 jobs from Reading to India in 2002. The union's campaign, which mixed a ballot for industrial action and community support, persuaded the company to agree a three-year moratorium on compulsory redundancies.

This protection of employees' job security is the finance unions' first priority when confronted with outsourcing, says Fleming: "We will try to ensure that the work sent offshore is new business or expansion."

The unions have had some success in this limited aim. After Unifi members at Lloyds TSB threatened industrial action in January, the bank withdrew a threat of compulsory redundancies attached to the planned closure of its Newcastle call centre - with a shift of 960 jobs to the subcontinent - and agreed to redeploy affected staff.

Boxing clever

The unions recognise that there is a limit to how many employees can be redeployed, and that current offshoring trends will lead to compulsory job losses in coming years. For this reason, the tactical campaign at workplace level is accompanied by attempts to bring public and political pressure to bear on employers. "We have to show how this affects people's everyday lives," says Unifi's Murphy.

This strategic war is being fought on several fronts. Fleming and Unifi's general secretary Ed Sweeney are taking their arguments to Parliament, giving evidence to a Trade and Industry Select Committee inquiry on offshoring, then to the Economic and Social Affairs Committee of the European Parliament.

Beyond appeals to politicians and local communities, there are national initiatives. Amicus MSF has widely publicised the research into public attitudes it commissioned from consultants Performance House. It found that: more than two-thirds of consumers would consider companies' offshoring activities when making purchasing decisions; 85% were worried by the security of data transmitted and stored abroad; and 54% thought offshoring would cause the level of service to decline.

The union has also made an alliance with the National Union of Students to put indirect pressure on the big finance employers. "We are not calling for a boycott of anyone per se," explains Fleming, "but if we contact 600,000 students and say you ought to be discerning in how you bank and how you spend your loan with companies that are offshoring jobs and possibly your career, we get hundreds of responses through the internet asking for information on which companies are offshoring."

This style of campaigning is a sign of the calculated adjustment the finance unions, among others, have made to working towards their aims. Recognising that threats of withdrawing labour are effective only up to a point, the campaigners are playing on the vulnerability of finance employers to anything that tarnishes their public images. Fleming says this is the strongest weapon against the powerful lure for senior managers of the 40% saving in operating costs to be gained from offshoring.

"If we reach a dead end with companies, strike action is an option," Fleming says, "But the idea of making their brand name unacceptable because communities and consumers become uncomfortable with it is something we wouldn't rule out. That's what would really scare senior management. Chief executives usually won't talk to me, but if I put out a press release they are on the phone immediately."

The approach has contributed to a few notable successes in the offshoring campaign. Both the Alliance & Leicester and Northern Rock building societies, and banking groups HBOS (Halifax Bank of Scotland), Nationwide and Royal Bank of Scotland have all, to varying degrees, defined themselves by opposition to the mass outsourcing trend, either safeguarding UK jobs or highlighting plans to expand UK call-centre operations.

In January 2004, Unifi achieved what it claims is a first for the sector when it signed an agreement with Barclays that any offshoring by the bank will be preceded by early consultation and measures such as voluntary redundancy registers, redeployment with training and other measures to minimise compulsory job losses. Barclays employee relations director
Nigel Fretwell says: "If globalisation is an inevitability, we cannot, and should not, ignore the responsibilities that are attached."

The CSR agenda

The finance unions are also furthering their major campaigns by exploiting the preoccupation with corporate social responsibility (CSR), which is linked to organisations' concern with their public image. Both Unifi and Amicus MSF have been pushing for pay equality, latterly working together in a sector where female employees are in a small majority.

An analysis by the Equal Opportunities Commission has revealed that women in finance earn 43% less than men on average, according to 2003 New Earnings Survey data, mainly because of the concentration of women in lower jobs and opaque grading structures.

Rory Murphy says there has been "slow progress" in persuading employers to carry out pay audits along the lines of those used in local government, but the union intends to keep pushing the issue, and has achieved good results at AXA, Barclays, Legal and General, and Friends Provident among others. He says: "We will use the moral argument, or the economic argument, that if the female chief executives of tomorrow see a pay imbalance they will not work for those organisations - whatever it takes."

The erosion of pension benefits is another longstanding campaign issue. Employers' flight from final salary schemes with open-ended funding liabilities - balanced by the potential for large surpluses - has been resisted by Amicus MSF and Unifi with mixed results.

Fleming says that actions so far have delayed the introduction of changes or reduced the proposed level of employee contributions, delaying the impact on members. He admits that when measures like this are modified rather than prevented the unions do not get much credit: "People need to remember that it's not always win or lose, it's often a case of getting what we can and limiting disaster."

Ballots for action to try and head off unfavourable pensions changes are accompanied by widespread publicity about employers' proposals. "These are pensions providers," points out Fleming, "so the embarrassment could be huge for them."

One voice

On 13 March delegates to a Unifi conference voted to ballot members on a transfer of engagements to Amicus MSF, and to recommend a "yes" vote. The transfer, which could be completed by June, would create a 200,000-strong sectoral union for finance. Amicus MSF's new NEC has already approved the move.

The dynamics are complex because the existing finance section of Amicus MSF would be swamped by the influx from Unifi, but the merged group would still form a minority (although the largest sectoral grouping) in the larger union.

The sectoral autonomy sustained by Amicus's new rulebook - itself partly inspired by the bumpy progress in integrating MSF and the former AEEU's structures - means Unifi's members are unlikely to be overwhelmed by early changes.

"Our foothold in the industry and organising skills with their muscle will be formidable," says Murphy. Fleming adds: "It will make us a single voice for people in finance."

1. Today's trade unionists: trade union trends report 01/3, TUC, £30.00, www.tuc.org.uk/publications/viewPub.cfm?frmPubID=134 .

2. Employment security in banking: the case of the Co-operative Bank, by Paul Marginson, Warwick Business School IRRU 1999, www.eiro.eurofound.eu.int/1999/10/feature/uk9910135f.html .

This article was written by Louis Wustemann, a writer and consultant on employment issues, lw@sivill.demon.co.uk.