Counting the cash, counting the cost

On one level, the pay deal at heathrow Terminal 5 was just a local event that affected about 3000 workers at one company. On another, it was a national sensation. When Building informed its readers that mere craftsmen were to be paid £55,000 a year for doing what had always been regarded as a fairly low-status manual job, the press picked it up and broadcast it to the nation. This was a great story: it aroused powerful emotions of envy and snobbery, and to a greater or lesser extent, it affected just about everyone.

The biggest impact was felt at the £2.5bn Terminal 5 project itself. The figures of £55,000 a year for skilled workers and £32,000 for unskilled on this scheme became the benchmarks by which other T5 pay deals would be measured.

All eyes instantly turned to the group with the reputation as the best organised and bolshiest in construction: electricians. As luck would have it, their union, Amicus, was reaching for its pen to sign a pioneering agreement of its own, the "major projects deal", which would include Terminal 5. This was to be the triumphant outcome of a year of negotiations. It was to make M&E workers the envy of their colleagues. It was also, it appeared, blown out of the water.

The union's first reaction was disbelief. Paul Corby, its national construction officer, said: "The Laing O'Rourke deal changes everything and will send shockwaves through the industry." Its second reaction was fury that BAA seemed to have given its blessing to a deal outside national frameworks. Its third reaction was more considered. Corby said Amicus would try to press on with a major projects agreement that included T5. The problem was that, according to national agreements, electricians ought to earn about 35% more than skilled building workers. If Amicus' members were to press for that differential, the union would be asking employers to pay them £75,000 a year – in which case, the Laing O'Rourke deal might just be good news after all. But if this deal were to fail, the union would try for a major projects agreement that did not include T5. Wage talks for the terminal would then be handled by the union's regional branch – with the threat of industrial unrest in the background if a suitable rate could not be agreed.

Our members will ask for whatever money they think they can get

Amicus spokesperson

The union's fourth reaction was downright philosophical. If labour market forces gave that much money to craftsmen, why wouldn't it do the same for electricians? "This is the only way contractors can get the workers and the skills, and keep them," an Amicus spokesperson said. "Our members will ask for whatever money they think they can get. If you want to stop people from going off to rewire houses, you've got to pay up."

Assuming that Amicus and other groups achieve the kind of success that UCATT, the T&G and the GBM have for their members, the effect will be to create a powerful microeconomy in west London – a whirlpool that will suck in 16,000 "person-years" between now and 2008.

The two groups most immediately at risk are small businesses in the vicinity of Heathrow and those South-eastern megaprojects that rely on the same sort of labour as T5: experienced, mobile workers willing to migrate to a project and live near it for several years.

The small businesses – those whose staff could just as well travel to Heathrow as to them – will be unable to compete on wages. Their workforces face decimation. Colin White, who runs a joining and construction company near Heathrow, is unequivocal. "It'll have a devastating effect," he says. "We employ 15 people, and if these figures are true, no doubt they'll want to move jobs. There will be no local labour left. And I couldn't put my company's rates up; it would affect my business and my commitments."

The megaprojects will have no choice, either. Gerry Lean, director of industrial relations at the Construction Confederation, puts it like this: "Workers have to come from somewhere. T5 will be taking men from other jobs, so other projects are going to inevitably have to reassess their rates to hang onto their staff. It's a big project, employing a lot of people, and it will have a ripple effect."

One indication of the pull that will be generated by T5 is given by Building's own experiences in the two weeks since the story broke. Many readers have been in touch to find out how they can get jobs on T5, including Craig, who has an IT job. "The wages came as quite surprise to me," he said. "I couldn't earn as much money as that even if I was more qualified. There are quite a few of us in the office considering a switch to construction."

All of the above raises an obvious question: if the wages are so out of line with industry norms, why did Laing O'Rourke, and ultimately BAA, agree to pay them?

The answer seems to be that it is worth it. That kind of money, linked to set productivity levels, virtually eliminates labour-related risk. In other words, managers on Britain's biggest construction project can be confident that they will have enough people to do the job, and that they will get it done. George Brumwell, the general secretary of UCATT, acknowledges this. "Now the unions have a very strong responsibility to make it a success," he says.

The industry is saying how ridiculous this is, but if it had kept up its apprenticeship programme it wouldn’t be in this position

Spokesperson for M&E union Amicus

Another factor is that Heathrow is a difficult location to get workers to. A medium-sized contractor reckons that it is "probably the worst location in London for that. People can't afford to live nearby. There is no area or resource of labour to get people from".

On the other hand, the employers are not going out of their way to publicise the deal to the rest of Britain's workforce. After much prodding, Laing O'Rourke issued the following statement: "We have a policy of employing and properly rewarding the best available talent. Construction competes with many other industries for top graduates and to recruit the best we must provide the most attractive shop window.

T5 represents a major opportunity for the construction industry." BAA has made hardly any public comment at all.

The factor that underlies, and ultimately explains, this whole story is well known: Britain's crafts training system has not produced the quantity or quality of workers required to meet the economy's needs. As an Amicus spokesperson says: "The industry is saying how ridiculous this is, but if it had kept up its apprenticeship programme it wouldn't be in this position."

And this is where the T5 deal can do the most good. The Construction Industry Training Board aims to recruit 76,000 skilled workers to the industry each year – that is 10,000 more than leave it. With the perception that a construction course might be lead to the kind of salary that an architect or quantity surveyor can only dream of, there will be a lot of people like Craig and his colleagues considering a career change. The example has been set by plumbing: reports of £70,000 for fixing a few boilers has led to a flood of graduates is signing up to training courses.