Tension on the rise in UK as soaring inflation erodes living standards
Workers from various sectors like railway staff, journalists, lawyers, and postal workers have been going on strike in recent weeks, demanding higher wages as inflation reaches an all-time high in decades.
At least 155,000 workers are currently striking, including postal workers, engineers, and call center agents of BT Group Plc (BTGOF), with two railway unions announcing additional strike actions for their 14,000 members this month.
Given this situation, further strikes are likely to unfold in multiple industries, with teachers, doctors, and nurses to vote on strike actions in the upcoming weeks. Even large unions like Unite and Unison, with 2.7 million members, are calling on other unions to join them in synchronized actions.
This is among the worst industrial unrest Britain has seen since the "Winter of Discontent" in the late 1970s, when rampant inflation pressured workers into mass strikes. According to the Office for National Statistics, approximately 7.9 million working days were lost between November 1978 and February 1979.
Rising prices and stagnant wages have fueled this year's controversy. The consumer price inflation hit 10.1% in July - the highest since 1982. Financial experts from Citigroup predicted a drop to 18% by early next year, while Goldman Sachs suggests it could reach 22% if gasoline prices don't decrease soon.
The workers are already feeling the pinch. Inflation-adjusted average real wages fell by 3% between April and June compared to the same period last year - the largest decline since over 20 years. Real wages Growth was minimal between 2010 and 2020.
Average household energy bills have increased by 54% this year and are expected to rise further by 80% to 3,549 pounds (4,124 USD) in October. According to research firm Auxilione, the average bill could reach 7,700 pounds (8,949 USD) by April 2023 – an additional 642 pounds (746 USD) per month.
In response to these developments, workers have mobilized.
"Low Morale"
Chiara Benassi, an associate professor of comparative labor relations at King's College London, shared her views with CNN Business, stating, "Britain has never experienced such sweeping disturbances in all sectors."
In the past few months, she explained, the cost-of-living crisis has evolved into a "hotspot" for long-term and widespread dissatisfaction.
"These strikes do not only affect blue-collar or low-skilled jobs, which are clearly affected by the cost-of-living crisis, but also highly-skilled roles such as doctors, engineers at BT, lawyers, academics, and teachers," Benassi said.
Deepsha Agrawal, an assistant doctor at Oxford University Hospitals, spoke with CNN Business, saying her colleagues are pushing for a higher salary increase than the 2% raise promised by the government in 2019.
"It's very frustrating because the current inflation rate by next year is expected to be very high," she said.
Her union, the British Medical Association, will soon hold a vote on whether members should strike. Agrawal believes they will. Many of her colleagues feel they cannot afford a house or start a family.
"Junior doctors work just as hard and are equally well-qualified as other skilled professionals," she said. "We work for our wages and get paid for the work we do every day."
Agrawal added, "Considering all that happened during COVID-19, we should be rewarded for what we do, not penalized for it."
Fall in Union Membership
The current wave of strikes cannot be directly compared to the 1970s and 1980s – mainly because the government has suspended tracking the number of striking workers and strike days due to the COVID-19 pandemic. It is expected to release an update in this month.
Richard Hyman, a professor of industrial relations at the London School of Economics, told CNN Business, "Compared to previous decades, these strikes have taken a backseat due to a significant decline in union membership."
By 1980, more than half of the British workforce was unionized. Today, fewer than a quarter are members, signifying a substantial drop.
Hyman added, "The strikes focused on industries that either no longer exist, like coal mining and steel, or were state-owned, like the public sector and large utility companies."
He further commented, "Precarious employment has grown, leaving many workers without appropriate jobs to strike. This is especially true for contingency workers who cannot strike due to having no stable employment positions."
Benassi said that strikes in the 1980s often played a crucial role in saving essential sectors, such as the mining industry, when the conservative government threatened to close many coal mines.
"Today's situation is different because we are discussing wages rather than issues like coal mine shutdowns," she said.
Additional Restrictions Imminent?
The current wave of strikes is significant because many industries are affected, and UK workers are forced to seek legal ways out of the situation.
"It's very difficult to strike in the UK, especially since stricter labor laws were introduced in 2016," she said.
The 2017 law makes it harder for unions to call for strikes, requiring at least 50% of their members to participate and 40% of them to support the strike. The law also extends the notice period for unions to inform employers of their intent to strike from a week to two weeks.
In contrast to the UK, Germany does not require a union vote or notice period for strikes.
The British foreign secretary, Liz Truss, who is campaigning to become the next prime minister after Boris Johnson, has pledged to further limit union strike powers.
Truss proposed raising the required voter approval for strikes to 50% and extending the notice period to a month.
"I will take a tough stance toward union actions," Truss said during her campaign on Sky News.
The Truss campaign did not respond to CNN Business's request for comment.
"There's a fairly hostile campaign saying we'll send temps to replace the striking workers, or they should return to work immediately, or there's already a wage increase," Manuela Galetto, an associate professor of labor relations at the University of Warwick Business School, told CNN Business's TV channel.
Galetto added, "Despite these challenges, the current situation may still encourage workers to strike, given the tightening labor market."
According to the Office for National Statistics, the UK's unemployment rate between April and June 2023 was 3.8%, the lowest recorded since over 50 years. On a per job vacancy basis, there is currently one unemployed person for every vacant position – a record low.
"This means that many workers can secure a job and seek a wage increase," Galetto concluded.
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In the current economic climate, businesses may face significant implications due to the prolonged strikes, leading to supply chain disruptions and rising costs. The ongoing strikes in various sectors such as transportation, public services, and education might bring unprecedented disruptions. This could further impact consumer spending, with implications for businesses heavily reliant on it. Additionally, the escalating inflation and stagnant wages will squeeze disposable income of consumers, negatively impacting businesses' revenue. Adapting and strategizing will be crucial for businesses to navigate this complex and challenging environment.
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Enrichment Data: The ongoing strikes in the UK, coupled with soaring inflation and stagnant wages, have severe implications for businesses. Here's an overview of the key effects and potential consequences:
Entrepreneurs should be prepared to face the following challenges:
Strikes
- Transportation Disruptions: Industrial action by railway staff and taxi drivers could disrupt transportation services, affecting commuters and businesses that rely on these services for logistics and employee transportation[4].
- Museum Closures: Strikes by museum staff could lead to closures of major institutions like the Science Museum, Natural History Museum, and V&A Museum, affecting tourism and local economies[4].
- Rail Services: Union action affecting Avanti West Coast services could impact regular train operations to London Euston, impacting commuters and businesses that rely on these services[4].
Rising Inflation
- Increased Costs: Higher inflation rates, particularly in food and non-alcoholic beverages, private school fees, and other essential services, will increase operational costs for businesses[2][5].
- Reduced Consumer Spending: High inflation can decrease consumer spending power, potentially leading to lower sales and revenue for businesses[2][5].
- Interest Rate Concerns: The sharp surge in inflation has weakened expectations for further interest rate cuts by the Bank of England, which could affect businesses' access to credit and borrowing costs[2][5].
Stagnant Wages
- Labor Shortages: Stagnant wages, combined with higher inflation, could exacerbate labor shortages as employees seek better-paying jobs with higher salaries to maintain their living standards[3].
- Higher Labor Costs: Businesses might encounter increased labor costs as employees demand higher wages to compensate for inflation, potentially leading to increased operational expenses[3].
Overall Impact
- Supply Chain Disruptions: The combination of strikes and inflation could result in supply chain disruptions, affecting businesses reliant on timely and efficient logistics[1].
- Economic Uncertainty: The ongoing strikes and economic pressure from inflation and stagnant wages create an uncertain business environment, making it challenging for companies to plan and invest for the future[1][2].
In summary, businesses in the UK are experiencing a challenging environment due to strikes, surging inflation, and stagnant wages. Companies should embrace adaptability and strategic planning to withstand the pressure and seize opportunities arising from this complex situation.
