Britain’s Trades Union Congress meets for its annual conference today in the most difficult economic circumstances for a generation. UK unemployment is heading towards three million. An economic recovery is taking place but is tentative. Because of the dire state of its public finances, Britain faces significant cuts in state spending that will slash more jobs.

Alongside that, the political climate is changing to the unions’ detriment. In 2010, the Conservatives are likely to win power for the first time in 13 years. For the unions, that would mean the end of a Labour government that has brought significant benefits such as a statutory minimum wage. It would mean the return of a Tory administration with whom relations are bound to be tougher.

Union leaders therefore meet in a sombre mood today. They are still a force, with 57 per cent of public sector workers still unionised. But they dare not threaten Gordon Brown’s weak government this close to an election. Back in 1978, public sector strikes saw rubbish pile up on the streets in a “winter of discontent” that crippled the Labour government and propelled Margaret Thatcher into power. Union leaders do not want to repeat that sorry drama again.

Instead, the big question this week is what the unions will do after the election. The economic downturn has brought rare harmony between employers and unions as workforces agree pay freezes to save jobs. But the post-election mood will be different. Public sector unions are warning of strike action over job cuts if state spending is squeezed. Industrial strife a year from now is a real prospect.

This must be averted. Union leaders need to demonstrate two things this week. First, they must be realistic about public sector reform. The fiscal crisis means public spending cannot be reined in by tinkering. There will need to be significant cuts in services. Reforms will be needed that give autonomy to parents to set up new schools and that devolve health services.

Second, the unions must show they can work with a Conservative government. David Cameron’s party is being pragmatic. The Tories are frank about the need for public spending cuts, but careful to avoid championing legislation that would undermine union power. Similar realism is needed from the unions. Britain has tough years ahead as it seeks to get the economy moving again. The last thing it needs is a new era of industrial strife.