United Kingdom: Latest working life developments – Q2 2016

The outcome of the referendum on EU membership, the immediate impact of the vote to leave, the social partners’ reaction and the steel industry crisis are the main topics of interest in this article. This country update reports on the latest developments in working life in the UK in the first quarter of 2016.

Outcome of the EU referendum vote

The referendum over the UK’s continued membership of the European Union was held on 23 June and resulted in a majority vote of 51.9% to leave. There was a turnout of 72.2%. The country was divided in its voting pattern: a majority voted to leave in England and Wales while in Scotland and Northern Ireland, a majority backed remaining in the Union. There were immediate economic ramifications; the value of the pound fell 10% against the dollar in two days and there was intense share price volatility. Momentous political fall-out also ensued, with the resignation of the Prime Minister, David Cameron, and a subsequent leadership contest ensuing in the Conservative Party. Moreover, two-thirds of Labour Party MPs (the major opposition party) rebelled against their leader, Jeremy Corbyn, and a leadership contest is now being fought.

It is notable that the two main social partners have presented a united front on the result of the referendum. It should also be noted that Article 50 of the Treaty on the Functioning of the European Union – the official mechanism for exit – has yet to be triggered and uncertainty continues.

Immediate reaction of social partners to the Brexit vote

Before the referendum, the main social partners had overwhelmingly supported staying in the EU. Only a minority of business leaders (such as the Director General of the British Chambers of Commerce) and a limited number of smaller trade unions (such as the National Union of Rail, Maritime and Transport Workers – RMT – in the transport sector) had supported a Leave vote. The main employer body, the Confederation of British Industry (CBI) had repeatedly pointed to the economic benefits of membership; for the unions, the Trades Union Congress (TUC) had published a number of reports on the potentially damaging impact of Brexit on workers’ rights in the UK, arguing that leaving the EU would lead to further detrimental labour market deregulation. Such concerns were seemingly validated when the Employment Minister, Priti Patel, campaigning for Brexit, declared that ‘halving the burdens of EU social and employment legislation … could deliver a £4.3 billion boost to the economy and 60,000 new jobs.’

In the run-up to the referendum, the TUC had issued a joint statement with EEF, the manufacturing employers’ association to back the Remain vote. In an unusual move, the two organisations united publicly in order to set out the potential loss in manufacturing trade and concomitant effects on businesses, jobs and employees. Moreover, following the referendum result, the CBI and TUC issued a joint statement on the impact of the vote, calling on the government to:

  • do everything possible to minimise the economic fall-out of leaving the EU;
  • secure jobs and investment;
  • reassure workers worried about the potential implications for employment and social protection.

The two organisations also spoke of the need for a national effort from business, trade unions and the central and devolved governments. This unusually united front serves to emphasise the gravity of the situation now confronting the UK.

Steel industry crisis

Although the referendum dominated the headlines both before and after the vote, the other major issue of the second quarter of 2016 is the potential demise of the British steel industry, an issue that has been overshadowed by the referendum. At the end of March, Tata Steel announced its intention to sell its entire UK operation, placing a total of 15,000 jobs at risk. On 21 April, the government ruled out any question of the business being nationalised, but announced that the government would take a 25% stake in any rescue operations and would make a support package available to any credible buyer. The government has also been working with the pension scheme trustees of Tata Steel and British Steel to minimise any negative impact of the underfunded pension scheme on the purchaser.

The separate acquisition of the Long Products Division at Scunthorpe – already in progress at the time of Tata’s announcement – was completed on 1 June. As regards the remainder of the business, the deadline for formal bids to be submitted to Tata was on 23 May. Earlier that month, Tata had said that there had been seven expressions of interest in its UK business, including one from a management buyout vehicle. However, it has been reported that the exit vote has stalled the sale process. The companies involved in the bidding process are assessing the situation, as are the banks and investors backing them.

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