2004 Annual Review for the UK

This record reviews the main industrial relations developments in the UK during 2004.

Political developments

The Labour government, re-elected in June 2001 for a second term of up to five years, continued in office throughout 2004. In local council elections held in England and Wales in June, the Conservative Party and the Liberal Democrat Party gained seats at the Labour Party’s expense. Labour lost control of a significant number of councils and the Conservatives control the largest number. In European Parliament elections, the number of UK Independence Party and Liberal Democrat MEPs increased while the number of Conservative and Labour MEPs decreased. The next general election is expected in the spring of 2005.

Collective bargaining

As there is no system for registering collective agreements in the UK, making an accurate assessment of the number of collective agreements in force is not possible. Government statistics show that, as at autumn 2003, the number of UK employees covered by a collective agreement was 8.66 million, or 35.9% of all employees. Collective bargaining in the UK continues to be highly decentralised: most bargaining is at company or workplace level, with little multi-employer bargaining outside the public sector.


Collectively-agreed basic pay rose by an average of 3.0% during 2004 (Labour Research Department[LRD], Workplace Report, November 2004), with the increase in average earnings being higher, at 3.7% (Office of National Statistics average earnings index, cited by LRD). Long-term pay deals have become more prevalent across a range of sectors. Among the key public sector pay awards recommended by the relevant independent pay review bodies, school teachers in England and Wales received a general pay rise of 2.5% from April 2004, to be followed by 3.25% from April 2005 to the end of August 2006, in what was the first multi-year pay award for teachers (UK0403105F).

Working time

Average collectively agreed normal weekly working time in 2004 was 37.2 hours (IDS HR Study 784, October 2004). Average actual weekly working hours for full-time employees was 37.3 hours (Labour Market Trends, December 2004). There were few reports of agreements reducing working hours. In the automotive sector, unions are currently pressing for reductions in basic hours whereas increased flexibility in working time is a key management objective (UK0403106F). New statutory working time limits for junior doctors took effect on 1 August 2004, in line with the EU working time Directive (UK0404105F).

Job security

No significant new employment security agreements were reported. In recent years, a number of high-profile employment security guarantees have been overtaken by closures or restructuring, as at Jaguar in late 2004 (UK0412106F). In November 2004, the Court of Appeal ruled that a collective agreement between Rover and its unions in 1997 that precluded recourse to compulsory redundancies was 'not enforceable'. The court rejected the unions’ case that the deal was effectively incorporated into individual contracts of employment.

Equal opportunities and diversity issues

The gender pay gap narrowed during 2004. Official statistics (based on a new measure) show that in April 2004 the gender pay gap for full-time employees based on average earnings was 18.4%, compared with 19.5% in 2003. The promotion of voluntary equal pay audits continued to be a key means of tackling the gender pay gap (UK0402104F). While these have been undertaken in a number of leading companies, the Trades Union Congress (TUC) expressed concern at a 'lack of interest' shown by other employers in conducting equal pay reviews, and continued to call for compulsory pay reviews. During 2004, the government agreed to fund a TUC equal pay experts panel designed to assist unions and employers in carrying out pay reviews. The government established the Women and Work Commission, which will make recommendations on further measures for tackling the gender pay gap.

Training and skills development

Traditionally, collective bargaining over training has been relatively rare, but research suggests that joint project work, consultation and other forms of employee involvement in training provision are becoming more widespread. According to the TUC, following the introduction of statutory rights for 'union learning representatives' (ULRs) under the Employment Act 2002, the number of ULRs present in British workplaces has grown rapidly to over 7,500. A TUC survey found that over half of all ULRs reported that they had entered into 'learning agreements' with their employer (UK0402103F).

Other issues

Pensions featured prominently on the industrial relations agenda during 2004. As companies have increasingly closed final-salary pension (FSP) schemes, in a number of instances unions have threatened or taken industrial action to prevent such a move. For example, in September 2004, workers who refuel aircraft at Heathrow, employed by AFS, mounted at 48-hour strike after rejecting a two year pay offer which, according to the Transport and General Workers’ Union, failed to compensate their members for terms and conditions, including pension provision, which had been taken away from them (UK0411107F). In December 2004, public service unions announced that they would be campaigning strongly against proposed changes to public service pension schemes involving increased pension ages, moves away from FSP schemes and reduced benefits. The unions demanded 'genuine negotiation' on any proposed changes, and stated that: 'If constructive progress is not made the possibility of industrial action may then arise'.

Legislative developments

During 2004, a number of significant changes to the legal framework were introduced, and proposals for further reforms published, against the background of continued concern on the part of employers’ groups over the volume and cumulative impact on businesses of employment regulation, especially from the EU.

The Employment Relations Act 2004 reached the statute book in September 2004 (UK0411101N). Certain aspects of the Act came into force in October, including protecting workers against being offered inducements by their employer not to belong to a trade union or not to have their terms and conditions of employment determined by collective agreement. Measures widening unions’ ability to expel or exclude racist activists came into effect at the end of December. Other key provisions, due to be brought into force in April 2005, included:

  • a series of measures designed to 'fine-tune' the existing statutory trade union recognition procedure, including the regulation of campaigning activity by employers and unions during recognition and derecognition ballots;
  • simplifying the legal requirements concerning industrial action ballots;
  • extending the protection against dismissal for workers taking official, lawfully-organised industrial action from eight to 12 weeks;
  • empowering the government to widen the means of voting that are to be available in statutory union elections and ballots (only postal voting is currently allowed); and
  • enabling the government to make funds available to trade unions to modernise their operations (UK0403104N).

New statutory disciplinary and grievance procedures, set out in the Employment Act 2002, took effect in October 2004 (UK0408102F).

In December, following lengthy delays reflecting conflicting views amongst employers and unions and ministerial policy disagreements (UK0405102N), the government announced how it proposes to deal with the issue of employers’ mandatory retirement ages in the context of forthcoming legislation outlawing age discrimination. The legislation will set a default retirement age of 65, but give employees the right to request to continue working beyond that age, which employers must consider seriously.

In April 2004, the High Court rejected a legal challenge by unions against two aspects of the Employment Equality (Sexual Orientation) Regulations 2003 - those which allow pension schemes to discriminate in favour of married people and religious organisations to discriminate against gay people. The unions had argued that these provisions did not fully comply with the 2000 EU Directive on equal treatment in employment. The court ruled against the unions on both counts, but stated that the exemption for religious organisations needed to be construed very narrowly (UK0409103N).

In July 2004, at a meeting at Warwick University, union leaders and government ministers reached agreement on employment law reforms and other policy commitments that are expected to feature in the party’s manifesto for the next general election (UK0409102N). The 'Warwick agreement', welcomed by unions as a 'significant shift' towards a more radical policy platform for the party, reportedly included a number of commitments in the employment law area, notably:

  • government backing for the proposed EU Directive on temporary agency workers;
  • providing that bank holidays will no longer count towards workers’ 20 days’ statutory annual leave entitlement;
  • a wide-ranging review of family-friendly rights, including flexible working for parents and carers;
  • extending protection under the Transfer of Undertakings (Protection of Employment) Regulations to pensions; and
  • increasing employee representation on boards of trustees managing pension schemes.

During 2004, EU-level discussion over proposed amendments to the working time Directive was mirrored within the UK, with the TUC and Confederation of British Industry (CBI) on opposite sides of the debate over the future of the individual opt-out from the 48-hour limit on average weekly working time (UK0406101N, UK0407103N and UK0410103N).

The organisation and role of the social partners

A number of significant union mergers took place in 2004. The finance union UNIFI and the Graphical, Paper and Media Union both merged with the manufacturing and professional union Amicus, bringing Amicus's membership close to that of Unison, the UK's largest trade union (UK0410105F).

The steel union ISTC - the community union and the Knitwear, Footwear and Apparel Trades Union (KFAT) also merged (UK0406102N). Both unions were based in sectors in which employment has declined significantly. They also share a community-based approach to trade unionism aimed at supporting members throughout their working lives, not just in the workplace, reflected in the name of the new union: Community - the union for life. During 2004, the Association of University Teachers (AUT) and the National Association of Teachers in Further and Higher Education began discussions on establishing a single union to represent academic and related staff in universities and colleges in England and Wales (UK0409104N).

On the employers’ side, there were press reports during the year of merger plans between the British Chambers of Commerce and the Forum of Private Business, both of which primarily represent small firms.

Industrial action

The latest available official statistics - for the 12 months to September 2004 (Labour Market Trends, December 2004) - show that levels of strike activity were higher than for the 12 months to September 2003 on all counts - number of stoppages (145 compared with 129), number of workers involved (220,500 compared with 207,000) and working days lost (992,100 compared with 694,000).

Notable strikes in 2004 included:

  • two 24-hour strikes at car maker Land Rover as part of a pay dispute (UK0402101N; UK0403102N);
  • two 24-hour strikes in February by university academics belonging to the AUT, in a dispute over pay, grading and related conditions; and
  • a one-day strike in November by up to 200,000 civil servants (UK0411105F) to protest against government plans to cut a large number of civil service posts over the next four years (UK0407105F).

Employee participation

Legislation to implement the European Company Statute - the European Public Limited-Liability Company Regulations 2004 - took effect in October 2004. Few UK-based companies are thought likely to incorporate as European Companies.

Consultation continued throughout the year with employers’ organisations and trade unions over the details of UK legislation to implement the EU information and consultation Directive (UK0402105F and UK0407104F). The final text of the Information and Consultation of Employees Regulations 2004 received parliamentary approval in December.

In May 2004, the government published its response to a consultation exercise on the UK experience of European Works Councils (EWCs) (UK0406105F). This concluded that there was a degree of consensus for some limited amendments to the EWCs Directive, but appeared to reject the key union demand for stronger statutory requirements in terms of the nature and timing of consultation. In July 2004, the Central Arbitration Committee issued the first ever ruling under the UK’s EWCs legislation, concerning an employer’s failure to provide information on the size of its workforce by country when requested by an employee (UK0409106N).

Absence from work

During the year, some employers, notably in the public sector, suggested that 'absenteeism' is on the rise. However, studies suggest that absence levels have remained broadly steady for 20 years and are rarely seen as a problem, but that new factors such as stress may be changing absence patterns and managerial policies for absence monitoring and control may need to be adapted. Attendance control appears to work where it is part of a wider set of measures addressing the pressures that lead employees to take time off, but simple 'crack-downs' on absence have been found to be counter-productive (UK0404103F).

Psychological harassment

It is widely accepted by employers, unions and employment relations specialists that workplace bullying is a significant problem in the UK. A range of bodies have published guidance on dealing with bullying, including the Advisory, Conciliation and Arbitration Service and the TUC. The TUC urges employers to develop policies on bullying and procedures to deal with complaints, train managers so that they are aware of the negative effects of bullying, and undertake regular risk assessments or stress audits to identify bullying at work. Some unions, including Amicus, have called for legislation to outlaw workplace bullying.

In October 2004, the Chartered Institute of Personnel and Development, the professional body for personnel and HR managers, published a report, Managing conflict at work, which found that while 83% of employers have a clear anti-bullying policy in place, when bullying does happen the focus is almost exclusively on supporting the victim, with little support, advice and guidance being offered to those accused of bullying. Moreover, while 75% of employers surveyed trained their HR managers in tackling bullying and harassment at work, only 55% trained their line managers, who are more likely to spot the problems before they escalate to a damaging level, leaving them 'ill-equipped and unprepared' to deal with the issue

New forms of work

Disagreement between employers and unions over the desirability of the draft EU Directive on temporary agency work continued throughout 2004. The CBI argued that the Directive would damage labour market flexibility and destroy employment opportunities. However, trade unions supported the adoption of the Directive, and the TUC repeatedly called for the UK government to abandon its opposition to the Directive. Changes in the law regulating employment agencies were made by the Conduct of Employment Agencies and Employment Businesses Regulations, which came into effect in April 2004, but unions take the view that the new legislation offers agency workers little protection compared to the rights they would have under the proposed Directive.

Other relevant developments

On 1 October 2004, as recommended by the independent Low Pay Commission (LPC), the main adult rate of the National Minimum Wage (NMW) increased from GBP 4.50 per hour to GBP 4.85 (UK0409108F). The government also accepted the LPC’s recommendation that a minimum wage should be introduced for 16-17 year olds, other than apprentices, set at GBP 3.00 from October 2004 (UK0403107F and UK0409108F). However, the CBI’s 2004 employment trends survey (UK0411104F) found that the NMW was now 'starting to bite' on more employers, reflected in CBI calls for the NMW to be frozen at its current level until 2006 (UK0412102N).

Also during the year, a series of highly publicised decisions by several major UK companies to relocate jobs to low labour cost countries such as India and China prompted widespread debate, with differing responses by unions as to the impact of such 'offshoring' (UK0405103F).


Government-union relations will be particularly important in what is likely to be an election year. While the Warwick agreement appears to have muted union leaders’ public criticism of the government’s employment relations record, ministers’ emphasis on modernising public services is likely to mean continuing tensions with the public sector unions. The implementation of the Information and Consultation of Employees Regulations will be a major focus of attention during 2005, as will the final report of the Pensions Commission, due in autumn 2005. (Mark Hall, IRRU)

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