The bigger picture: how eastern european workers

Since the European Union welcomed 10 new members on 1 May, an army of skilled builders and labourers from Eastern Europe is free to come to Britain to earn higher wages and thereby to help solve the industry's skills crisis. The tabloids might have screamed about overcrowding, housing shortages and floods of economic migrants, but the real story is about the effect on UK wage deals, site standards, and subcontractors.

The first effect of 1 May is that thousands of semi-legal foreign workers are suddenly more visible. "The construction industry has been harbouring foreign workers for many years," says UCATT general secretary George Brumwell. "The difference now is that they are here legally, and they must be treated properly."

British construction firms have a new and legitimate way to recruit foreign labour. Construction bosses can order staff from the Continent over the phone to top up their skills shortfalls as easily as buying tools from a catalogue. But it is not just the legitimisation of the white-van men on Cricklewood Broadway and other informal construction labour exchanges. Last week, Building revealed that labour agencies are already in talks with major contractors about supplying foreign labour on a labour-only subcontract basis (4 June, page 9).

London-based employment agency Montbretia is offering a service whereby British companies can hire staff from European construction firms using the agency as a broker. Under the scheme, the British employers take no responsibility for the workers' employment conditions, including taxation, health and safety training and welfare.

Furthermore, the foreign workers recruited to work in Britain will earn lower wages than British employees, because pay will be pegged to wages in their country of origin. In its marketing literature Montbretia says British employers are free to negotiate the wage rates of its Euroworkers. "The costs will be for UK building and construction companies to negotiate direct with the Eastern Europe companies, but you [British firms] can expect to pay a lower cost," the agency states.

This is the point where the trade union movement begins to have a problem with the foreign influx. "Let us be clear – we have no problem with foreign workers coming here, provided they are employed on the same terms and conditions as British workers," says UCATT's Brumwell. "There needs to be parity between pay and no exploitation of these people."

M&E union Amicus feels as strongly as Brumwell on the issue. National construction officer Paul Corby has already led his members on a march on Westminster to demonstrate against the potential impact of foreign workers on industry wage rates and safety regimes.

Both unions have placed the issue right at the top of the TUC agenda, and have already met with DTI ministers and the Treasury over the issue, and future meetings are already pencilled in. The unions' main gripe is over the British government's interpretation of the European Union's Posted Workers Directive.

Put simply, the directive states that British firms employing temporary foreign workers must pay them the same wages as UK workers. At the same time, European firms must not undercut UK firms when tendering for contracts in the UK by taking advantage of the lower prevailing wage rates in their own countries.

We say 1 May as a kind of truce. All the foreign workers here illegally had to come out of the woodwork and be made legal. To be honest, it’s been a bit of a bureaucratic nightmare

Chief executive of leading contractor

But the unions object to the British government's interpretation that foreign contractors "posting" workers to the UK must only pay them the UK minimum wage. They argue that the difference between the minimum wage and the far higher rates standard on UK sites could be exploited by East European contractors. "We don't want the national wage agreements that we fight so hard to negotiate being undermined by the arrival and exploitation of cheap foreign labour," Corby says. "There is a big gap between the minimum wage in the UK and what British skilled operatives earn."

At the Construction Confederation, industrial relations director Jerry Lean warns that the industry could face a wave of industrial action over the issue. "We could face a union backlash if we see large numbers of Eastern European workers freezing out the UK workers. That's when the shit really would hit the fan."

Lean says that, so far, there has not been a large influx of individual workers arrive independently, but there is evidence that that large Eastern European subcontractors want to come to the UK and tender at lower prices to UK firms. "The Eastern block firms are trying to infiltrate our market. Under the new freedom of movement rules, the Eastern European companies can employ workers in their own countries while servicing contracts in the UK. They pay lower rates to workers and undercut UK firms at the bottom of the subcontract chain in the process."

"It goes further than worrying about the individual workers' pay; this is about the early signs since 1 May, that Eastern European firms are putting out feelers through brokers like Montbretia to infiltrate the UK market," says Lean.

The chief executive of one leading contractor agrees that Eastern European firms will try to get a foothold in the UK market in the long term. "It's not a problem while there is plenty of work for UK workers. It's when UK workers are struggling for work and being undercut by low wages abroad that the competitive edge of the Eastern block will become strikingly apparent."

The chief executive adds that there has not been a massive influx of foreign workers since 1 May. He feels that 1 May was largely symbolic: the date when construction firms employing foreign workers had to make sure they were all employed legally. "We saw the day as a kind of truce. All the foreign workers here illegally had to come out of the woodwork and be made legal through having the appropriate and official paperwork. To be honest, it's been a bit of bureaucratic nightmare."

He sees the real issue now as welfare. "We don't want the unions on our backs. We have to be seen to only use foreign workers as top up staff where skills shortfalls occur, and not as using them as a cheaper replacement to UK workers."

UCATT's Brumwell would be delighted to hear this, and now wants to hear a similar tune from Whitehall. "The government cannot allow the foreign workers to undermine its indigenous workforce. It needs to toughen up on existing regulations such as the Posted Workers Directive so that they [the foreign workers] are employed on the same basis as UK workers."

Of course, the unions' concerns go deeper than just the issue of pay. The construction industry is already killing about 80 people in accidents every year, and the unions believe that the problem will only be exacerbated by the arrival of non-English speaking foreign workers.

At another leading construction firm, the operations director says that employing foreign workers is more problematic than it's worth. "Employers first of all have to go through the procedures of ensuring the workers are legitimate, then they have to make sure they have the right skills and training. But then you have to worry about their English skills and welfare before you can even begin to worry about their competence," he says.

Contractors may shun the hassle of employing the foreign workers directly due to the complications and costs of verifying their qualifications and skills as well as the problems of language training.

Dave Pearson, director of Overseas Human Resources, a labour agency that brings construction workers to the UK from eastern Europe, says that employers in the UK lack knowledge of the procedures for recruiting foreign workers, and of their welfare requirements. His agency is promoting its services in these areas to save UK employers the responsibility. "We can offer 'ground services' – we house them, start bank accounts, cover insurance etc," says Pearson.

He adds that skilled, experienced Continental tradespeople do not want to come to the UK without a cast-iron job offer, but UK employers are currently not geared up for that. "There is a massive gulf between UK contractors who need skilled workers and the workers themselves in Eastern Europe." However, now that the foreign workers are legal and official, the process of employing them has become much more transparent – giving ammunition to the unions looking for ways to fight the exploitation of foreign workers.