Business Analysis: The worm turns as new mood of militancy grips Britain's banks

Normally docile workers in the financial sector are becoming increasingly restive over pay increases they believe barely keep pace with inflation and managers who allegedly impose more demanding targets.

Normally docile workers in the financial sector are becoming increasingly restive over pay increases they believe barely keep pace with inflation and managers who allegedly impose more demanding targets.

Yesterday 30,00 staff at Lloyds TSB began to vote on an overtime ban and "withdrawal of goodwill" in protest at a pay rise management claims amounts to an average 3.5 per cent.

Lloyds TSB Group Union (LTU) points out that many employees will receive nothing and others will get below-inflation increases. The LTU claimed many staff had not received a rise for three years and that some were paid £10,779 for working a 35-hour week.

The ballot comes two weeks after HSBC employees belonging to the huge Amicus union staged a 24-hour strike over a pay offer also regarded as insulting.

Employees' leaders have an uphill battle. Senior managers in the financial sector have always been sceptical of the ability of unions to make much of an impact on employees' terms and conditions. Union penetration has been low and employees have generally been regarded as moderate. Unions in the sector have traditionally been small, numerous and consumed by fratricidal jealousy.

They confined themselves largely to representing individuals rather than taking collective action. They rarely had the ability or the inclination to take the financial institutions on.

But there are reasons for believing that the latent power of the union movement in the sector is growing. The LTU is flexing its muscles, but the most important development is the creation of Amicus, which has considerable financial and political clout. The consolidation began six years ago when Unifi (the Banking Insurance and Finance Union) and the NatWest Staff Association merged. Last year the enlarged organisation, also called Unifi, merged with Amicus, which had 50,000 members in the insurance sector.

The amalgamation has not ended there. Amicus is now expected to merge with the Transport & General and the GMB unions. That will not significantly increase its strength in the financial sector, but will give the new "super union" a membership of nearly 2.5 million and enormous resources. It could wield up to 30 per cent of the vote at Labour Party conferences.

And the new-found unity is reflected in the growing bullishness of senior officials. David Fleming, the national officer for the finance sector at Amicus, warned that in future banks in particular would not be allowed to get away with salary rises below inflation. "From now on we will have a zero tolerance attitude towards zero pay increases," he said.

Steve Tatlow, the LTU's assistant general secretary, said staff at Lloyds TSB regularly complained that they were pressured into working long hours to meet stretching targets. "At the same time they are either having their pay frozen for years on end or receiving below-inflation pay rises. This cannot continue."

Out of the bank's workforce of 70,000, most staff working in branches, service centres and the head office will be voting and Mr Tatlow predicted that any industrial action would have a "significant impact" on customer service. About 80 per cent of staff working in branches are LTU members, he said.

Many branches would have to open later and close earlier because they have been relying on staff to work extra time to maintain opening hours; customers would experience longer queues; processing of cheques and credits would be delayed; some branches might also need to close at lunchtime since they have depended on the goodwill of staff to ensure they remain open.

Amicus has been testing its mettle at HSBC, where staff staged a 24-hour walkout on 27 May - the first major piece of industrial action at a leading bank for more than eight years. Union officials will meet next week to evaluate the degree of support for the walkout. It was claimed that hundreds of HSBC employees had signed up to the union as a consequence of the action and representatives are predicting further stoppages.

Employees' leaders have been particularly exercised by the £9.6bn profits posted by HSBC, which it compares with the "insulting" pay offer to employees. Amicus claims it yields a below-inflation increase for 45 per cent of staff and nothing for 10 per cent of the workforce.

Amicus says that while pay bargaining at most institutions has gone reasonably well, the union's relationship with HSBC has been difficult. HSBC is the only bank that has not struck a deal with Amicus in the present pay round.

But by taking a tougher line on salaries, Amicus and the LTU are making "off-shoring" more attractive to management. The wider the gap between pay in Britain and the Far East, the more financial institutions will gain by exporting jobs. Unsurprisingly, however, employees' leaders say any attempt to compete on wage costs with the Indian sub-continent is impractical.

Amicus estimates that more than 15,000 jobs had been transferred abroad since October 2003 by insurance companies, banks, management consultancies and legal practices. Deloitte Consulting predicts that two million jobs could leave Europe by 2008. Amicus is aware that it cannot stop the trend, but it can attempt to minimise the process and its effects on members.

At AXA, Royal & SunAlliance and Prudential the union has negotiated deals where site closures and compulsory redundancies are avoided where possible; that there are "meaningful" consultations on any such proposals and redeployment and retraining is offered to those who want it.

Amicus is at pains to point out that offshoring does not just affect routine call-centre jobs. Highly skilled roles such as software development, human resources, accounts and underwriting have also fallen victim to the process, it says.

The union is also keen to address the gap between the pay of men and women in the sector. In the economy as a whole, men earn 18 per cent more than women, but Amicus estimates that in the financial sector the gap is 43 per cent. That is largely because there is a fairly rigid "occupational segregation": women are recruited to certain relatively low-paid jobs.

Much union membership in the sector has been young, female and transitory - unpromising material for union recruiters. Many of those who join see it as akin to a subscription to the AA or the purchase of an insurance policy.

Turnout in the HSBC strike ballot, for instance, showed no great enthusiasm for the walkout - 10,000 were balloted but only 35 per cent of them bothered to vote. Of those, 68 per cent opted for industrial action.

Companies in the finance sector should be aware that despite the traditional timidity of the workforce, unions - Amicus in particular - are far better equipped to employ industrial and political muscle should members seek to exercise it.