1998 Annual Review for the United Kingdom

This record reviews 1998's main developments in industrial relations in the United Kingdom


In the third quarter of 1998, the UK's GDP was 2.5% higher than a year earlier. Balance of trade in goods was in deficit by GBP 3.9 billion, compared with GBP 2.6 billion a year earlier. In December 1998, the all-items retail prices index (RPI) inflation rate stood at 2.8%, down from 3.0% in November.

In 1998, the employment rate rose to 73.6% from 73.1% in 1997. The unemployment rate, calculated on the ILO's definition, was 6.2%, down from 6.8% in 1997. However, the fall in unemployment later in 1998 was less than estimated earlier in the year. Total employment grew by 0.9% over the 12 months to September, a figure which included a growth of 2% for employees and a fall in self-employment of 4.5%. Full-time employment grew by 1.3% while part-time employment fell by 0.3%. Again these figures hide a growth in the numbers of both full- and part-time employees and a decline in the numbers of full and part-time self-employed.

The Labour Party was elected to government in May 1997 with a central pledge in the industrial relations arena to "modernise" workplace relations by acknowledging the "dynamic relationship between fairness and efficiency". Labour's first full year in government, 1998, proved to be a busy one as it continued plans to introduce and implement promised industrial relations measures - both national and European in orientation (UK9812166F). Notably, a white paper on Fairness at work was published in May (UK9806129F), giving details of a proposed statutory trade union recognition procedure, and outlining a range of other employment law reforms.

Key trends in collective bargaining and industrial action

The UK system of collective bargaining remains largely decentralised, with the coverage of bargaining continuing to decline. The first findings of the 1998 Workplace Employee Relations Survey (WERS) were published in October by the Department of Trade and Industry, and revealed that trade unions were recognised for collective bargaining purposes in 45% of all workplaces with at least 25 employees, compared with 53% in 1990 (UK9811159F).

According to the 1998 New Earnings Survey (carried out in April), the average gross weekly pay of all full-time employees had increased by 4.6% since the 1997 survey to GBP 384, while that for part-time employees rose by 10% to GBP 125. Earnings of the highest paid employees increased faster than those of the lowest paid. Managers and administrators were the occupational group with the highest average weekly earnings. Average private sector earnings increased more rapidly than average public sector earnings (5.1% compared with 3.6%) causing some concern to the government early in the year (UK9805126N). Full-time employees worked an average of 40.2 hours per week compared with an average of 19.4 hours for part-timers.

A major commitment of the current government is to introduce a statutory national minimum wage (NMW). The Low Pay Commission (LPC) was appointed in July 1997 to recommend the level of the NMW, and it published its report in June 1998 (UK9807135F). The government welcomed the report and accepted an initial main NMW rate of GBP 3.60 per hour before deductions. It also agreed that all workers aged 16-17 or on formal apprenticeships should be exempt, and that there should be a "development rate". The LPC proposed that an initial development rate of GBP 3.20 should apply to all those aged 18-20 and to all workers starting a new job with a new employer and receiving accredited training. However, the government decided to phase in the development rate in two stages, starting at GBP 3.00 from April 1999 and increasing to GBP 3.20 in June 2000. The government issued draft regulations establishing the NMW for consultation in September (UK9809152N), and the legislation was due to come into effect in April 1999. It is estimated that between 1.7 and 2.1 million employees (7.4% to 9.1% of the total) will be affected by the NMW (UK9812167N).

Industrial restructuring continues to demand rapidly changing work practices and job losses. Despite this, the number of working days lost through industrial action in the 12 months to September 1998 was provisionally estimated to be in the region of 287,000 from 174 stoppages, down on the same period for 1997. Some 48% of the days lost were in transport, storage and communications, with manufacturing accounting for 12% and construction 10%.

Industrial relations, employment creation and work organisation

Employment creation was a major focus of the Labour government's 1998 policy both at home (UK9804116F) and in Europe. In practice, the emphasis lay first on "employability" through education and training and a "New Deal" for unemployed people, and second via the promotion of labour market flexibility. In line with the EU Employment Guidelines, the government consulted both the Confederation of British Industry (CBI) and the Trades Union Congress (TUC) about the contents of the UK National Action Plan (NAP) on employment (UK9805122F). The two organisations directly contributed in the form of two joint statements concerning the "employability" and "adaptability" guidelines, which were incorporated in the Plan. The social partners' input was coordinated during the first quarter of the year by officials of the CBI, TUC, Department for Education and Employment, Department of Trade and Industry and the Treasury. The NAP stressed that social partners have a valuable role to play in taking the UK's employment agenda forward. In the area of employability, the social partners emphasised their view of the importance of effective vocational training throughout working life in order to meet rapid changes in markets, technology and work organisation, and to enhance competitiveness and highlight areas where employers and trade unions are working together.

In the area of adaptability, the joint CBI/TUC statement in the NAP stressed that the two organisations fully support proposals to encourage workplace partnerships to promote new forms of work organisation. It is stated that employers' objectives of more highly trained and adaptable workers and employees' objectives of employment can be achieved only if organisations are dynamic and competitive. The two organisations also affirmed that:

  • government has an important role in promoting and disseminating good practice;
  • flexibility in working time is an important element in any new approach to work organisation;
  • the implementation of the EU working time Directive will provide an opportunity for the two sides of industry to reach agreements on how best to reconcile the flexibility that employers want with the security that workers need; and
  • the CBI and TUC have participated in negotiations at EU level on part-time work to introduce "sensible" provisions to increase security and flexibility.

The social partners' positions support the theme in the European Commission's 1997 green paper on Partnership for a new organisation of work that the key to improving competitiveness and employment is "through a better organisation of work at the workplace, based on high skill, high trust and high quality". To achieve this, the UK government has encouraged "partnership" at the workplace, as part of the partnership approach it sees as the central theme of its industrial relations policy, both at national and company level. Ian McCartney, minister of state at the Department of Trade and Industry told an EU conference on social dialogue and the European social model in Vienna in November 1998 that: "For modern companies to succeed, they need to work smarter. Partnerships can help them do that. The best companies in the UK currently practice partnership - it works in both union and non union settings."

However, there are ambiguities in this approach. "Partnership" is the current "buzz-word" in UK industrial relations and while all sides to the debate - including employers and unions - arguably embrace the rhetoric of partnership, agreement on its meaning and practical application is more difficult (UK9811159F).There is no single model and the TUC's vision of partnership, preferably through collective bargaining, has to be weighed against some employers' idea of partnership between management and employees, where the latter need not necessarily be collectively represented.

Partnership arrangements in companies often involve "job security agreements" (JSA s). Case studies have shown how partnership agreements in the form of JSAs are likely to be introduced in very specific circumstances - usually when firms have been wrestling for a protracted period of time with the problems of implementing various quality and flexible-working measures against a backdrop of successive crises and redundancies (UK9810153F).

With regard to more general flexibility issues, while the UK promotes its success in making labour markets more flexible, a recent study by the Cranfield Institute (UK9801192F) indicates that the UK comes top of international "league tables" in terms of two indicators: the ease of hiring and firing employees; and excessive hours worked by employees. In terms of arguably more important measures of flexibility, such as the ability of organisations rapidly to introduce new products and the level of workers' skills, the UK's position was highly disappointing. This highlights that the differing interpretations of flexibility can be very important. Furthermore, flexibility is not just about individualising work relationships, as has been the case of the UK, but can also involve collective measures, as in some other European systems. The fact that the present UK government is aiming for both types emphasises the need for a broad approach to flexibility.

The UK government finally implemented the requirements of the 1993 EU Directive on certain aspects of the organisation of working time (93/104/EC) in October 1998, nearly two years after the original transposition deadline (UK9810154F). The Working Time Regulations 1998, which also cover the working time aspects of the 1994 Directive on the protection of young people at work (94/33/EC), incorporated a number of detailed amendments to draft Regulations issued for consultation in April (UK9806129F). Their key provisions essentially remained the same, reflecting the requirements of the two Directives. Nevertheless, there was criticism from the CBI and other employers' organisations that employers had been given insufficient time to adjust to the new legal environment. The TUC criticised the scope for "workforce agreements". The flexible application of some of the Regulations' provisions is possible by means of collective agreements between employers and trade unions or, in the case of groups of workers who are not represented by recognised unions, by means of "workforce agreements" (a new mechanism in UK employment law) signed by a majority of the workers concerned.

A further controversial aspect of the Regulations is that individual employees can voluntarily agree with their employer in writing that the 48-hour limit on average weekly working time should not apply in their case. The UK and (to a lesser extent) Ireland are the only EU countries to have taken up this "individual opt-out" option allowed by the Directive.

Developments in representation and role of the social partners

A key issue in in UK industrial relations is the so-called "representation gap" - whereby a significant and growing proportion of the workforce is without trade union representation or other independent employee representation (UK9811159F).

Proposals for a statutory trade union recognition procedure were at the centre of the Fairness at work white paper published in May (UK9806129F), following a partial agreement between the CBI and TUC (UK9801194F) and significant disagreements on some issues (UK9803113N). The white paper proposed legislation to provide for union recognition where this is favoured by a majority of an appropriate group of employees. In the absence of voluntary agreement with an organisation employing over 20 employees, unions could apply for statutory recognition, which would be awarded if various conditions were met (relating to membership and support in the bargaining unit). Trade unions, with some reservations, generally welcomed the proposals, while the CBI, though calling the recognition plans "workable" argued that "this white paper, taken with other new regulations such as those on working time and the national minimum wage, will add new burdens on business" (UK9808145N).

Months of lobbying by the TUC and CBI followed the publication of the white paper. In December, when the government revealed the results of its consultations by outlining the details of the forthcoming legislation, it became clear that a number of "refinements" had been made (UK9901173F). These arguably tended to reflect the priority given to maintaining the government's "business-friendly" credentials, representing a further move towards meeting employer concerns and diluting some elements favoured by the unions. The CBI described the changes as going "some way to meeting business concerns", while the TUC expressed its disappointment.

In February, the Department of Trade and Industry launched a public consultation exercise on Government proposals for new rules on consulting representatives of employees affected by redundancy or a change in ownership of the business for which they work (UK9803109F), with the aim of creating a clearer legal framework. However, ministers' readiness to initiate these reforms in the specific areas of collective redundancies and business transfers, and their belief that "consultation is an important aspect of promoting the partnership approach to employment relations and helps business competitiveness", does not signal a willingness to embrace the European Commission's wider agenda for statutory employee information consultation in national enterprises, on which a draft Directive was issued in November (UK9811162N).

In its Fairness at work white paper, the government welcomed the extension to the UK of the European Works Council (EWC) Directive (94/45/EC). The paper stated that the government intends to consult widely on the details of national legislation to implement the Directive, which is to be in force by December 1999. The TUC estimated that over 60% of UK-based multinationals currently covered by the Directive had already agreed to the establishment of EWCs or were in negotiations to do so. However, according to a report to the 1998 TUC congress, the pace at which agreements were being signed had slowed significantly.

The CBI and TUC remain the predominant "social partner" organisations representing UK employers and trade unions respectively, as evidenced, for example, their role in the preparation of the UK's NAP. The two organisations predominantly, though not exclusively, provide the social partner representatives on tripartite bodies such as the Advisory, Conciliation and Arbitration Service (ACAS), the Health and Safety Commission (HSC) and the Low Pay Commission. The CBI's representativeness is effectively unchallenged except in the small firms sector where a range of organisations compete with the CBI for influence with government. Despite the continuing decline in union membership and the existence of a number of non-affiliated unions of significant size, the TUC remains unchallenged as the principal trade union confederation in the UK. A much smaller organisation grouping unions representing managerial and professional workers - the Managerial and Professional Staff Association (MPA) - also exists, but a significant proportion of its membership overlaps with that of the TUC.

Industrial relations and the impact of EMU

The Labour government has virtually ruled out entering EMU during the current parliament, taking the position that the UK should join a successful single currency, but provided that a range of economic conditions are met. The CBI is also in favour of UK entry into EMU when the economic conditions are right. The tone of TUC's comments on adopting the euro is positive, though its formal policy of encouraging public debate about the issue is more neutral. In practice, a range of views are held in both union and business circles (UK9802102F).

However, it has been argued that EMU will have very similar industrial relations implications across the EU regardless of whether a Member State joins (A preliminary review of the industrial relations implications of Economic and Monetary Union, K Sisson, J Arrowsmith, M Gilman and M Hall, Warwick Papers in Industrial Relations, No. 62, January 1999). An important consideration for the UK is that, as an extremely open economy, it is both home and host to a larger number of multinational companies than any other EU country, and MNCs are likely to be a significant conduit through which information and ideas will flow from country to country around Europe. From this point of view, it is difficult to envisage that the UK will be immune from industrial relations developments in the EMU countries or the implications of greater transparency of pay and costs that EMU brings. A second consideration is that the UK will not be able to escape the pressure for restructuring that EMU is likely to generate. A third consideration is that the tight controls on public expenditure that EMU brings are also likely to be as much a feature of the UK as they are for other countries. Finally, having signed up to the "social chapter" of the EU Treaty, the UK will in practice be affected by continuing developments in the EU social dimension, which are likely to be much influenced by the course that EMU takes.

An interesting example of the potential implications of EMU for pay bargaining in the UK was the 1998 agreement at Vauxhall, linking pay to the Deutschmark (UK9805127N).

Conclusions and outlook

As in 1998, the Labour government's legislative agenda is again likely to dominate the industrial relations scene in 1999. The bill to give effect to the Fairness at work proposals for new individual, collective and "family-friendly" employment rights was expected early in 1999. As well as the trade union recognition issue, the bill was expected to include:

  • changes to the law on industrial action ballots and the dismissal of workers taking industrial action;
  • provisions to implement EU Directive 96/34/EC on parental leave;
  • a ban on discrimination based on trade union membership, including "blacklisting";
  • a right to be accompanied at disciplinary and grievance hearings; and
  • financial support to promote partnerships at work.

Both the CBI and the TUC can be expected to campaign intensively in an effort to influence the final shape of the legislation.

Implementation of the EWC Directive is due by 15 December 1999. The government is to implement the Directive by means of regulations and a consultative document setting out its detailed proposals was expected in the early part of 1999, prior to draft regulations being laid before parliament for approval. Finally, the National Minimum Wage Act comes into force on 1 April 1999. (MW Gilman, IRRU)

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