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The UK鈥檚 largest local government body has urged councils to protect workers transferred to contractors before taking any action against firms named in the Office of Fair Trading inquiry into tender malpractice.

The Association of Public Sector Excellence (APSE), which had previously taken a hard line against 112 firms accused of cover pricing by the OFT, made the statement after unions asked it to clarify its position on local authority workers novated to private sector contractors.

Trade union Unite warned that thousands of former council workers could lose their jobs if contractors were removed from tender lists as a result of the OFT鈥檚 investigation.

When a local authority outsources work to a contractor, the new service provider usually takes on 鈥� or novates the council staff formerly providing the service. If the local authority then decides to remove that contractor from its framework list, the novated workers might find themselves without a job, according to Unite.

An APSE spokesperson said: 鈥淎PSE would encourage councils to consider employment issues carefully when looking at contractual arrangements and everyone would wish to avoid a disproportionate and unfair impact on innocent workers.鈥�

In the weeks following the OFT鈥檚 statement of objections, which named the firms accused of malpractice, APSE made a statement that called for local authorities to 鈥渞ecover any loss by all means available鈥�. It did not warn its members against blacklisting construction firms, even though the OFT鈥檚 accusations remain unproven and removal from framework lists could breach EU rules.

Bob Blackman, national construction secretary for the T&G section of Unite, warned about possible redundancies in a letter to APSE. The letter said: 鈥淚f these construction companies face exclusion from tender lists, their workers could face losing their jobs. It is time for local councils and authorities to take responsibility.鈥�

The news came as a flurry of companies signed up to 好色先生TV鈥檚 Rebuilding Trust campaign during the last weekend before it was submitted to the OFT on Monday.

A total of 76 construction companies, trade bodies and clients have joined the campaign, which pledges an end to bid-rigging and cover pricing.