A Welsh trust's decision to privatise sterile services has led to the first strike in the NHS since Labour came to power.

Cardiff was putting the finishing touches to its preparations for this week's Euro summit at the end of last week. Workmen were putting up flags and barriers outside the Edwardian town hall, white and glowing after a pounds3m facelift.

Television crews were arriving in advance of the 3,000 journalists expected to cover the event. Welsh secretary Ron Davies told local newspapers that visitors could expect a 'carnival atmosphere' in the capital city of Wales, where pounds7m of taxpayers' money was spent on the two-day bash to mark the end of Britain's EU presidency.

But visitors who travelled out of the city centre to the University Hospital of Wales could see another side of Tony Blair's Britain.

In a scene more reminiscent of the 1970s than the era of cool Britannia, a straggle of women stood picketing under umbrellas at the hospital's main gate, holding up Unison placards calling for an end to privatisation in the health service.

'Toot if you support us,' urged one of the posters. Passing ambulances, buses and cars tooted sirens and horns. A pensioner rang his bicycle bell.

Unison regional officer Mike Colley was quietly amused by the idea that if Euro leaders fell ill during the summit they would come face to face with the first strike in the NHS since Labour came to power.

But trouble has been brewing among sterile services staff since 1996, when the trust announced it was looking for private finance initiative partners for a pounds2m upgrade of its equipment and facilities to meet new EU standards, introduced on Sunday.

Unison says it learned that the trust had received tenders to design, build and manage the facilities in April last year.

'Unison opposes privatisation, especially of essential services,' says Mr Colley.

'We feel that sterile services is as close to a clinical service as it is possible to get, but the trust went ahead anyway.'

The contract was awarded to Sterile Services International, a subsidiary of construction company Impreglio, which is in turn owned by car manufacturers Fiat.

Mr Colley says Unison met the firm's senior managers late last year. 'We were told that although TUPE (the regulations protecting workers' conditions) would apply on day one, on day two there would be changes and staff would lose their jobs,' he claims.

The trust then took over negotiations from the company. When the two sides failed to reach agreement, Unison ran two ballots, which came out in favour of industrial action.

On each occasion, action was postponed because new guidance on PFI projects was expected from the Welsh Office.

When it became clear that the guidance would not emerge until July, the trust decided to push ahead with its plans.

And after a third ballot, sterile services staff began an indefinite strike on 8 June.

The trust said it was 'deeply disappointed' that 'a very generous pay offer' of 7 per cent, in return for Sunday, bank holiday and flexible working, had been rejected. It claimed that staff were holding out for 20 per cent.

Unison disputes this, although it has pressed for harmonisation of pay rates for staff transferring to Sterile Services International and extra pay for multi-skilling and flexibility.

Mr Colley says the union's main concern was to guarantee job security and make sure new staff are employed on the same terms and conditions as existing workers. 'The trust is saying TUPE will apply and staff will be employed on Whitley rates for the 10 years of the contract,' he says.

'The problem is, we have no guarantee that staff will have jobs for Whitley rates to apply to.'

Sterile Services International declined to talk to HSJ last week on the grounds that staff were in dispute with the trust.

The trust has been confining itself to issuing bulletins through a public relations company since a press conference early last week.

Local papers reported surgery services general manager Alison Williams as saying: 'If it is our only option, we will have to seek alternative suppliers.' Unison claimed these 'threats' helped to bring about a breakdown in talks.

As a result, at least 300 elective operations were cancelled last week in an area with the longest waiting lists and the longest waiting times in Wales.

Bro Taf health authority, which covers Cardiff, has 18,524 of the 73,419 patients waiting for treatment in Wales.

'I am not happy about the industrial action because my constituents are facing increased anxiety about their operations,' says Cardiff Central MP Jon Owen Jones. 'Reducing waiting lists should be the priority here.'

If Mr Owen Jones, a Labour MP, has views on Unison's stance against privatisation in the NHS, he was unwilling to put them on record in the week that chancellor Gordon Brown decided to sell off the air traffic control service.

Of the three other local Labour MPs, only Cardiff North's Julie Morgan is prepared to venture some backing for the strikers. 'We had hoped sterile services would stay in the NHS,' she says. 'The reason it did not was finances.

'I have great sympathy for the staff, who feel strongly that they should stay in the NHS, but I also have sympathy for the patients.'

Pickets were also on duty last week under a cold and exposed covered walkway, leading from a privately funded car park - built by Impreglio - to a mini-shopping mall doubling as the hospital's main entrance.

The walkway has been named Aneurin Bevan Way. 'I don't think he would have thought much of this,' said one picket, indicating the privatised fringes of the trust site.

Sterile services supervisor Howard Lawrence agreed. 'If Labour were still in opposition, they would be down here with us. There is no sign of them now,' he says. 'I expect we will see plenty of them at this summit, though.'