Trading places: Local authority trading companies and their impact on staff

This UNISON report, written by the Labour Research Department, charts the rise in use by councils of local authority trading companies (LATCs) as investment vehicles or the delivery of services, their failure to deliver promised cost saving and financial gain, and the loss of pay, condition and protections for the workers delivering these services.

It shows that LATCs are now an established and widespread part of the local authority landscape, employing over 90,000 staff who would previously have worked directly for local authorities. Their growth has contributed to a ‘de-standardisation’ or fragmentation of pay and conditions, with large variations in terms and conditions offered. While a proportion retain parity with councils and put their workers into the Local Government Pension Scheme, a greater number do not. 

Established as a cost-cutting measure for councils, the drive to make these companies financially sustainable and ‘competitive’ has led to reduced wages, fewer
benefits, and less job security as workers become dependent on contract renewals.

In addition, workers transferred to LATCs lose access to the collective bargaining agreements and protections provided under the local authority pay negotiating bodies NJC and SJC. This has resulted in weaker bargaining power for workers, with the terms and conditions of even TUPE’d staff eroding over time and the creation of a two-tier workforce. In turn, the impact of this pool of ‘cheaper’ labour puts downward pressure on the NJC bargaining process.

The report concludes that it is crucial for workers and their unions to understand the different types of LATCs and how they function, so that they can:

• propose alternative service delivery models to councils considering setting up LATCs;
• better organise workers in established LATCs;
• build public support for ending outsourcing; and
• demand better funded public services.