BT workers call off strike as they agree 3% pay deal

British Telecom and the Communication Workers Union settled their long-running pay dispute yesterday, with staff getting a sweetened 3 per cent increase for each of the next three years and the company hailing the security offered by the agreement.

Both sides declared themselves content with the deal, which has brought to an end the increasingly bitter row. As recently as Monday, the CWU was forced to withdraw a planned strike ballot after the company threatened to ask the courts to find that the vote had been unlawfully arranged.

Yesterday's deal will see 55,000 BT staff represented by the union, who are categorised by the company as "team members", get a 3 per cent pay rise in each of the next three years, with this year's award backdated to January. The agreement, which will cost BT an extra £130m, is better than the 2 per cent it initially offered but less generous than the 5 per cent the CWU threatened to strike over.

BT had feared that any industrial action would hamper its ability to roll out its next generation of super-fast broadband connections and deliver communications for the London Olympics in 2012.

"This agreement is good for BT, its employees, shareholders and customers," said Ian Livingston, the chief executive. "BT will benefit from a long period of certainty, while our employees will have financial stability during uncertain economic times."

The union was equally ebullient. Andy Kerr, the CWU deputy general secretary, said: "This is a fantastic deal for our members, providing a fair rise in their basic pay this year and for the following two years. This deal is among the highest pay settlements in the country this year, recognising the contribution of staff and BT's success over the past year.

"Although our ballot for strike action was ultimately withdrawn, we believe it played a major part in getting BT back to the negotiating table with a significantly improved pay offer."

Despite not getting the 5 per cent pay rise it initially sought, the CWU said the settlement would also benefit pension funds. Union members will be balloted over the pay offer, and a spokeswoman for the CWU said she hoped BT workers would see their pay rise in next month's wage packets. Although the deal is below the current inflation rate, most economists expect inflation to slip back over the next few years as Government spending cuts hit the economy and up to 600,000 public-sector jobs are lost.

BT described the CWU as a key partner, with a spokesman praising the union's effort to help the company cut 35,000 jobs over the past two years, which was completed with no compulsory redundancies. However, a spokesman confirmed there would be more job losses in future, although the number was not yet known.

More senior BT staff, who are not represented by the CWU, have already agreed a 2 per cent "framework" pay deal with the company but the 35,000 managers are also entitled to bonuses not available to the unionised workforce.

On Monday, the CWU cancelled a ballot that could have led to the first national strike at BT for 23 years. The company had threatened to go to court to challenge the structure of the ballot in a similar way to which British Airways succeeded in getting a Unite union vote declared unlawful.