How Industrial Strikes Impact The UK Economy
As the UK’s industrial strikes roll into their ninth straight month, we’re assessing the impact they’re having on the economy. Today, we’ll check out why these are happening and what they really mean. After that, we’ll outline the week’s hottest trading events for your calendar.
Strike 1, 2, and 3!
Since June last year, a whole bunch of labour strikes and industrial disputes have been taking place in many industries that make up the UK economy, including rail, healthcare, and education. Most of the complaints from workers are over pay and working conditions.
When will things improve?
Well, here’s the rub — it’s about to get much worse. Wednesday this week is set to be the single-worst day of strike action so far, with teachers, civil servants and train staff all set to protest at the same time.
Strictly speaking, the strikes won’t end until the demands of the unions are met and the government has so far shown very little willingness to compromise and give into their various demands.
On the flip side they don’t have too much to bargain with as the UK economy struggles to recover from the impact of lockdowns, Brexit and sits on the precipice of the next global recession. Rock and a hard place, anyone?
How have the rail strikes affected the economy?
Well, unfortunately, the direct impact of the strikes on the UK economy is a bit tricky to measure in real-time. If you take the UK’s latest GDP data, it actually looks quite positive, rising 0.1% MoM — something that really took analysts by surprise!
The knock-on impact of the football World Cup on the hospitality sector is being touted as the main reason for that bump, but there’s also a significant lack of slump from rail strikes.
According to the Office for National Statistics, 467,000 working days were lost in November, the most since 1990.
National Rail has said that lost ticket sales now amount to a whopping £400 million! But rail travel has only ever returned to 80% of pre-pandemic levels. So, people have essentially found a way to cope with life without taking trains. Or perhaps the work from home transition has played a role in the changes.
Arguably the largest impact could be felt in the hospitality sector, especially in city centres, yet that’s likely to be balanced out by higher spending in the areas that people usually commute from.
What about the other strikes?
An estimated 30,000 hospital procedures were postponed due to the nursing strikes in December. For the first time in history, tens of thousands of nurses took part in strikes to demand fair pay and improved patient safety.
And then there are the teacher strikes. The National Education Union (NEU) says teachers have experienced a real-terms pay cut over the past 12 years. It expects around 23,000 schools in England and Wales to be affected in the first of its seven planned walkouts.
Teacher salaries in England fell by an average of 11% in real terms between 2010 and 2022. The impact of teaching strikes will be felt by parents and ultimately businesses losing labour due to childcare concerns.
Strike action results in less productivity, which in turn means less profits. Labour Law expert, Ivan Israelstam confirms that; “The employer is likely to lose money due to delayed service to clients or to lost production time. The employees will lose their pay due to the no work, no pay principle.”
Analysts say that the UK economy will face a prolonged recession with declining growth and increased unemployment in 2023–24, causing deflation. This is in sharp contrast to Sunak’s pledge to boost economic growth.
What do you think?
How do you think the UK economy will weather the storm? Are you worried? Drop us a tweet at @_contentworks.
Top fundamental events for week commencing 30.01.23
It’s going to be a busy week in the markets. Here are all of the main events that you won’t want to miss.
● EUR — German GDP Growth Rate YoY Flash (Q4)
● CNY — NBS Manufacturing PMI (JAN)
● EUR — Germany Unemployment Change (JAN); Germany Unemployment Rate (JAN); Germany Inflation Rate YoY Prel (JAN)
● USD — CB Consumer Confidence (JAN)
● NZD — Employment Change QoQ (Q4); Unemployment Rate (Q4)
● EUR — Core Inflation Rate YoY Flash (JAN)
● USD — ISM Manufacturing PMI (JAN); Fed Interest Rate Decision
● GBP — BoE Interest Rate Decision
● EUR — ECB Interest Rate Decision; ECB Press Conference
● USD — Non-Farm Payrolls (JAN); Unemployment Rate (JAN); ISM Non-Manufacturing PMI (JAN)
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The Contentworks team