Job losses and strike threats hit banking sector

In May 2005, large-scale job losses were announced at Abbey, LloydsTSB, and the Clydesdale and Yorkshire banks in the UK. Another contentious issue is pay, with ballots for strike action being held at LloydsTSB and HSBC.

Industrial relations in the banking sector have been strained in recent months by continued job losses and what the trade unions perceive to be low and unfair pay offers, despite a context of strong profits. The latest job cuts have followed mounting concern at the scale of 'offshoring' in the UK, involving the overseas transfer of support and customer-service jobs, notably to Asia (UK0405103F). Pay is also a contentious issue, with the largest union in the sector, Amicus- which merged with the banking union Unifi in 2004 (UK0410105F) - balloting members for strike action in two of the UK’s largest banks, HSBC and LloydsTSB. Any strike would be the first official action since a dispute over the operation of a performance-related pay scheme at Barclays in 1997 (UK9711179N)

Job losses

In May 2005, Abbey announced a further 1,000 job cuts in its cost-cutting programme, taking the total to 4,000 since the takeover by the Spanish bank Santander in November 2004. The job losses were revealed as Santander announced first quarter profits of EUR 1.2 billion, of which Abbey contributed EUR 153 million. Amicus denounced the cuts as 'an example of worse practice', but the company defended the job losses as necessary to restore Abbey’s 'cost/income ratio' to the level of its competitors. Abbey does not recognise Amicus for collective bargaining purposes, but said that it had consulted the Abbey National Group Union (ANGU), an in-house but independent union affiliated to the Trades Union Congress, which represents almost half of its 25,000 employees. Linda Rolph, general secretary of ANGU, said the cuts were a 'shame' and were causing uncertainty for the workforce.

Around the same time as the Abbey announcement, Clydesdale and Yorkshire banks, both part of National Australia Bank (NAB), reiterated that they would be axing 1,700 posts within the next 12 to 18 months due to the closure of 100 of their 449 branches. Lynne Peacock, head of NAB’s UK operations, insisted the branch closures were necessary 'to reflect the changing needs of our customers and the different ways in which they are banking'. In total, NAB is cutting 4,200 jobs in Britain and Australia.

Lloyds TSB meanwhile revealed that it was cutting 435 back-office roles from five centres around the country in a reallocation of work within the UK. The bank had earlier faced industrial action over plans to offshore jobs but avoided a strike ballot after a compromise with its unions.

Pay disputes

In May 2005, Amicus members at HSBC voted in favour of strike action in protest at a pay award which, the union said, would lead to a wage cut for thousands of workers. The strike is scheduled for 27 May, the day of the bank’s annual general meeting. Amicus national secretary Rob O’Neill said that his members were 'deeply unhappy about an imposed pay offer ... at a time when the bank has made record profits'. Earlier this year, HSBC revealed a 37% rise in pre-tax profit to GBP 9.2 billion for 2004. The union claims that the new pay package will leave 10% of staff without a pay rise in 2005, while a further 45% will receive a below-inflation increase. Amicus is also opposed to a new performance-related bonus scheme. The union says that longer-serving staff will lose out as the bonus will cease to be calculated according to salary.

Amicus has about 15,000 members in HSBC, out of a clerical workforce of 23,000, and around 10,000 took part in the strike ballot. More than two-thirds (68%) voted in favour of strike action. However Sue Jex, head of HSBC employee support, said that 'a yes vote by just one in 25 of our UK employees is clearly no mandate for strike action and we hope the union recognises this and acts responsibly ... We are grateful to those members of staff who have resisted the union’s campaign of misinformation on pay and bonuses and their efforts to damage HSBC’s reputation with customers.' The company said that, taken together, its pay and bonus award was worth a record GBP 164 million. Almost two-thirds of workers had received above-inflation pay rises and seven in 10 had been given a bonus of at least 10%, with just 1.0% of staff receiving no pay rise and no bonus. HSBC says its pay deal is weighted in favour of the lowest paid, and claimed that the one in 10 workers receiving no increase in base pay 'are already paid more than the going rate'.

Amicus also balloted its 15,000 members in Lloyds TSB in February 2005 on a company pay offer that the union said would result in up to one in 10 employees facing a pay freeze for a third consecutive year. The ballot followed a failure to reach agreement in meetings with the Advisory, Conciliation and Arbitration Service in January. Amicus says that the company’s policy of offering zero pay awards for high-performing staff on the top of their pay scales is unacceptable. Iain MacLean, Amicus national secretary for Lloyds TSB, said: 'These people are some of the longest serving employees at Lloyds TSB and the backbone of a company earning billions of pounds of profit. Our members are not highly paid and they cannot withstand another year with no pay increase and a standstill in their pension benefits.' In March 2005 Lloyds TSB, the UK’s fifth-biggest bank, announced pre-tax profits for 2004 of GBP 3.49 billion.

Commentary

Retail banking in the UK has been revolutionised since the late 1980s. It has been transformed from a sheltered sector with paternalistic employment practices to a highly competitive sector characterised by ongoing restructuring and innovation in pay and employment practices. Deregulation, which encouraged the demise of sector-level collective bargaining, also led to widespread merger and acquisition activity which, together with the rise of telephone and direct banking, has contributed to branch closures. Much of these job losses were absorbed by a growth in customer service and support jobs in the 1990s, but these have been increasingly transferred to Asia in recent years. A similar process is evident across the financial services sector, with insurance companies like Norwich Union, AXA and Royal & Sun Alliance announcing the offshoring of thousands of jobs in the last year alone.

At the same time as union concerns over jobs have intensified, so have worries about the emerging effects on employee earnings of complicated performance and market-related pay schemes, particularly for longer-service staff who have reached the top of their scales. The shift from strong internal labour markets with secure employment and incremental, service-related pay, to a 'performance management' culture of targets, appraisals and bonuses was used to underpin changes in the job roles of clerical staff. Unions seemed reluctantly to accept this, partly because most staff appeared better off, and partly since they were largely concerned with avoiding compulsory redundancies under the various restructuring programmes. Now faced with problems such as how to accelerate 'below market' staff to average rates and what to do about 'above market' high performers - besides reconciling all of this to equal pay - this strategy is under strain, not least given the renewed threat to jobs at a time when the banks continue to post huge profits.

Yet it is this profitability which provides the unions with some opportunity. The banks may not be unduly worried about the direct impact of strike action, though a loss of employee goodwill would be more of a longer-term problem. More significant, however, may be the impact on customer and public opinion, as the unions mount increasingly sophisticated external marketing campaigns targeting 'greedy banks'. Such campaigns not only risk the loss of customer accounts, but provide a more favourable context for any 'windfall tax' that the government might impose. This possibility is fairly remote - the banks already contribute around GBP 10 billion in corporation tax each year, a third of the total received by the state - but it may be enough to concentrate senior managers’ minds. Despite constant pressure for 'shareholder value', a further revision of pay schemes may be a small price to pay for avoiding damaging industrial action. (J Arrowsmith, IRRU)

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