United Kingdom: Eiro annual review 2009

  • Observatory: EurWORK
  • Topic:
  • Published on: 10 January 2011

United Kingdom
Thomas Prosser

In 2009, the UK continued to be affected by the economic downturn and unemployment within the country increased. There were several large cases of restructuring associated with this and the UK Government and social partners developed and proposed various policies to deal with the effects of the crisis. Collective bargaining coverage, trade union density and levels of industrial action also declined in the UK in 2009. 2010 will see the election of a new UK Government, and given the likelihood of public sector pay freezes and cuts being implemented by the new Government it is possible that public sector trade unions will respond with industrial action.

1. Political developments

The Labour Party Government which was re-elected in May 2005, continued in office throughout 2009. However in local elections held in the England region of the UK and European elections held throughout the UK in June 2009, the Labour Party fared very poorly. In both elections, the Labour Party lost ground to the Conservative Party. 2010 will see a UK General Election that is most likely to be held in May. Most commentators expect this to result in the formation of a Government by the opposition Conservative Party.

2. Collective bargaining developments

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. 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.

The most recent official figures on trade union membership in the UK were published by the Department for Business, Enterprise and Regulatory Reform in April 2009. According to the Department’s annual report on trade union membership, published in April 2009 and based on Labour Force Survey data for the fourth quarter of 2008, 33.6% of employees were covered by collective agreements in the fourth quarter of 2008. This represents a slight fall from the figure of 34.6% for the fourth quarter of 2007. In the UK, the gap between the public and private sectors in terms of collective agreement coverage continues to be substantial: only 18.7% of private sector employees were covered by a collective agreement in the fourth quarter of 2008 (the figure was 20.0% in the fourth quarter of 2007), compared with 70.5% of public sector employees (the figure was 72.0% in the fourth quarter of 2007).

The most recent Workplace Employment Relations Survey, carried out in 2004 and published in 2006 (UK0607019I), showed that collective bargaining remained largely confined to the ‘basic’ issues of pay (61% of workplaces which recognized unions), working hours (53%) and holidays (52%). In addition, more than one-third (36%) of workplaces which recognized unions negotiated over pensions.

3. Legislative developments

Several legislative developments related to industrial relations and the employment relationship occurred in the UK in 2009. Firstly, there was a small extension in the UK National Minimum Wage (NMW) that took effect from 1 October 2009. This followed the UK Government accepting the recommendations of the independent Low Pay Commission in May 2009. From October 1 2009, the NMW rose from GBP 5.73 to GBP 5.80 for workers aged 22 years old and over, rose from GBP 4.77 to GBP 4.83 for workers aged from 18 to 21 years old, and rose from GBP 3.53 to GBP 3.57 for workers aged 16 to 17 years old.

A number of other laws also came into effect in the UK in 2009. In some cases these followed the adoption of the Employment Act of 2008. In April 2009, a number of new laws came into force. Firstly, regulation providing parents with children up to the age of 16 with the statutory right to request flexible working arrangements was implemented in the UK. Secondly, extra penalties for employers paying under the minimum wage were introduced. Further, regulation was introduced to simplify existing procedures for individual dispute resolution in the UK. Finally, the minimum statutory entitlement for paid holidays was increased from 4.8 to 5.6 weeks a year. In August 2009, regulation also came into effect, consistent with the EU Working Time Directive, to ensure that the working time of trainee doctors is in line with the 48 hour limit on average working weeks that is stipulated by the Directive.

Various legislative proposals were also announced in the course of 2009. In July 2009, the UK Government announced that the review of the current default retirement age of 65 that had been planned for 2011 would be brought forward to 2010. Of more significance, April 2009 also saw the UK Government introduce a major new equality bill. In the employment sphere, the bill proposes to extend the circumstances in which a person is protected against discrimination, harassment or victimisation because of a protected characteristic; create a single ‘equality duty’ which will require public bodies to consider the diverse needs of their workforce when developing employment policies; allow an employer to take positive action to enable employees to overcome or minimise a disadvantage arising from a protected characteristic; and enable an employment tribunal to recommend to an employer who has lost a discrimination case to take steps to remedy matters not just for the benefit of the claimant but also the wider workforce. The bill also proposes measures to promote pay equality between genders through creating obligations upon organizations to be more transparent regarding pay levels within organizations.

Also, policy announcements were made in September and October 2009 by the UK Government that reflected the effects of the economic downturn and the demands of employers’ groups. These included a delay in the implementation of the EU Directive on Temporary Agency Work until October 2011, the phased rather than immediate introduction of workers’ rights for time off work to undertake training, and the cancellation of legislation to extend employees’ time off work entitlements to include a wider range of civic roles and duties.

4. Organisation and role of the social partners

The government’s annual statistical report on trade union membership, published in April 2009 and based on Labour Force Survey data for the fourth quarter of 2008, showed that the rate of union membership (union density) for employees in the UK in the fourth quarter of 2008 was 27.4%. This was down from 28.0% in the fourth quarter of 2007. In the fourth quarter of 2008, union density among female employees was 29.2%. This figure represented a 0.4% fall from the fourth quarter figure for 2007. In the fourth quarter of 2008, trade union density amongst male employees was 25.6%. This represents a 0.8% fall from the 2007 fourth quarter figure of 26.4%.

There were no reported instances of trade union mergers in the UK in 2009. In 2009, there were also no major changes reported in the organization and role of employers’ organizations.

5. Industrial action

The latest available official statistics, for the year to October 2009, showed a steep decline in industrial action in the UK in terms of workers involved and working days lost. In the 12 months to October 2009, there were 130 stoppages recorded, in which 158,000 workers took part and 204,000 working days were lost. For the 12 months to October 2008, 125 stoppages were recorded, in which 551,400 workers took part, and 837,700 working days were lost. The decline in strike action during the year may be attributable to rising unemployment in the UK, and is also likely to be attributable to the absence of large scale public sector strikes, as occurred in 2008, in 2009.

The UK statistics cover stoppages of work caused by labour disputes connected with terms and conditions of employment. Stoppages involving fewer than 10 workers or lasting less than one day are excluded unless the total number of working days lost is 100 or more. The statistics include and do not distinguish between strikes and ‘lock-outs’, lawful and unlawful stoppages and ‘official’ and ‘unofficial’ disputes.

There were several strikes that attracted significant political and media attention in the UK in 2009. Most notably, there was a strike at the oil group Total in January and February that attracted sympathy strikes at other power plants around the United Kingdom. The actions were particularly notable as they were triggered by Total’s use of Italian and Portuguese workers rather than UK workers. This triggered a debate in UK political and media circles about immigration, the rights of UK workers, and the application of EU law in the UK (UK0902019I). A 48 hour industrial action also affected the London Underground, the London metro system, in June 2009. This strike was over pay, and triggered fresh concerns in the UK about the ability of the National Union of Rail, Transport and Maritime workers to negatively affect the economy and logistics of London (UK0907059I). Other notable actions occurred at the Wind Turbine Blade manufacturer Vestas in July and August 2009, and at the Royal Mail in October 2009 (UK0909029I).

There was a change to the law on workplace dispute resolution in 2009. From April 2009, the 2002 regulations on workplace dispute resolution were reformed to make the existing regulations more practical and less legalistic. Specifically, a new code of practice was developed by the UK Advisory, Conciliation, and Arbitration Service (ACAS) that was designed to reduce the number of cases of unfair dismissal brought before UK employment tribunals every year.

6. Restructuring

In 2009, the UK labour market was characterized by extensive industrial restructuring. Unemployment rose from 6.2% to 7.8% from January 2009 to January 2010. This pays testament to the extensive levels of industrial restructuring that occurred within the UK in 2009. In 2009, the European Restructuring Monitor (ERM) recorded 130,411 job loss announcements in the UK. This figure demonstrated an increase when compared to the 2008 figure of 114,673. According to ERM, the UK was also the EU member state the most affected by job loss announcements in the 2009.

Several large scale cases of company restructuring and workforce reductions occurred in 2009. The financial sector was particularly affected. At Royal Bank of Scotland, a financial sector organization that was particularly affected by the economic crisis, 10,500 job losses were announced in the course of 2009. The job losses are likely to affect back-office staff and front-desk staff, and it is thought by trade unions that the job losses will involve considerable redundancies. Lloyds TSB, a large financial sector organization, also announced that it was to cut 5,000 jobs by the end of 2010 following its merger with the firm HBOS. These job loss announcements are also likely to involve considerable redundancies. Barclays, another large financial services organization, also announced 2,100 job losses in 2009. These job losses will take the form of redundancies. The retail sector was also marked by major job loss announcements in 2009. In November 2009, First Quench, a firm that retailed alcoholic beverages, announced that it had become bankrupt and was to make 5,928 redundancies. The redundancies were implemented in December 2009. In February 2009, the firm Stylo, that retailed shoes, announced that it had become bankrupt. This involved the announcement of 2,500 job losses that were implemented by redundancy in February 2009.

7. Impact of economic downturn

In 2009, the UK continued to be affected by the global economic downturn. By the start of 2010, unemployment had risen to 7.8% within the country. Although some commentators stated that ‘green shoots’ of recovery had been evident in 2009, others expected the recession to continue throughout 2010 and beyond. Bipartite and tripartite responses to the crisis in the UK continued to be rare in the UK. This is attributable to the lack of a tradition of legally enshrined tripartite forums in the UK, the de-centralized nature of collective bargaining arrangements, and also to the relatively low rates of trade union density within the UK.

The UK Government responded to the economic downturn with several employment related policies. At an ‘employment summit’ in January 2009, the UK Government announced subsidies for employers who recruit the unemployed and enhanced training opportunities for those who are unemployed. Further, the rate of the NMW was increased only slightly in response to concerns from employers that labour costs were becoming too high, and concessions were made to employers regarding the implementation of the Temporary Agency Work Directive and legislation on employees’ entitlement to time off work.

The UK social partners are polarized with regard to their views of the correct regulatory responses to the downturn. The TUC have consistently urged looser monetary and fiscal policies and the upholding of employment and investment in the public sector as the best response to the crisis. By contrast, the CBI have argued that more austere fiscal and monetary policies, the cutting of unnecessary expenditure in the public sector, and the balancing of the UK Government budget are the best policy responses to the crisis. These separate positions also informed the debate on a cutback in public sector expenditure that took place in UK politics in late 2009. CBI support proposals to cut levels of public expenditure, whilst TUC are opposed to them.

8. Other relevant developments

In 2009, the economic downturn continued to dominate the political and industrial relations agenda in the UK. Unemployment rose by 1.6% during the year, and the agenda was characterized by debate over correct regulatory responses by the UK public authorities to the crisis. Of particular pertinence for 2010 was the debate that raged over public sector expenditure in 2009. The TUC wished to maintain existing levels, whilst the CBI wished to cut existing levels. Given that all three main UK political parties have stated they intend to implement some form of cuts, it appears highly likely that some form of cut in public expenditure that includes pay cuts or freezes will be implemented by the next UK Government that will be formed in 2010. An implication of this is that quite substantial public sector strikes could well characterize UK industrial relations in 2010. Public sector trade unions have called industrial action in response to UK Government pay policies in previous years, and public sector trade unions may attempt to test the resolve of the next UK Government to implement pay cuts or freezes within the sector.

Several other relevant developments occurred in UK industrial relations in 2009. There were various disputes at firm-level regarding the cutting of wages as a response to the economic crisis. In July 2009, British Airways sought to implement large reduction in its employee costs. This included asking members of staff to work for free for a period, take unpaid leave, or switch to part-time work. In August 2009, there were actions at ASIG and Fujitsu in response to the firms’ cutting of employee terms and conditions. The UK social partners also continued to lobby the UK Government on employment-related issues. At its annual congress in September 2009, the TUC called for the UK Government to strengthen the application of the EU Posted Workers Directive so that UK collective agreements would not be undermined. Further, in September 2009, the CBI issued a 12 point ‘business agenda’ that was aimed at the next UK Government and included calls for the reform of public sector pensions and greater action on skills and youth unemployment. Also significantly, in May 2009, Unite the Union, a UK general trade union, signed a joint statement with the German trade union Ver.di and the U.S trade union United Steelworkers in support of labour standards in Bangladesh. This signified an important procedural development regarding the internationalization of the concerns of UK trade unions.

Thomas Prosser, University of Warwick

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