Serco has lost the contract to provide refuse collections in the London borough of Bexley, amid a union dispute over pay among its HGV drivers.

The council said Countrystyle Recycling would take over the contract from October, adding that part of the new deal required all staff to receive the London living wage as a minimum.

Around 140 Unite workers have been striking since 12 July after what it described as “a dismal industrial relations regime”.

The union had claimed there was a culture of management bullying at the Thames Road depot in Crayford, south east London, as well as health and safety concerns and an apparent failure to upgrade some workers to agreed pay rates.

Ruth Heydon, Unite regional officer, said it was pleased the contract would be changing, but she added: “One element in this dispute has been won, but a number of other issues remain.

“Serco still owes our members tens of thousands in back pay and has not answered for the unfair use of its substance misuse policy to victimise staff.

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“Our members are well aware that Serco will now try to run down the clock until October so it can avoid paying what it owes and ignore the blatant weaponization of its drugs testing policy.

“It’s going to be a long hot stinking summer in Bexley if Serco’s bosses believe they can get away with it.”

Countrystyle Recycling, which holds operator licences in the East of England as well as the South East and London traffic areas, said it was “absolutely delighted” at winning the 10-year contract.

MD Chris Howard added: “Securing our first domestic waste collection contract is a quantum leap forward for Countrystyle Recycling, but reflects our wider strength in logistics, an understanding of our heartland and the work we have put in for a number of years to understand the council’s desires and ambitions for its residents.”

Councillor Peter Craske paid tribute to Serco’s work on the contract and said it played a key role in helping Bexley be the number one borough in London for recycling over the last 15 years.

Graeme Waugh, Serco senior contract manager, said: “It is always our intention to work in partnership with trade unions so we are disappointed the decision to take strike action has been made while conciliation discussions are ongoing.

"We are working hard to minimise disruptions to residents at this time and would urge the union to reconsider this action.”