Expensive winter of discontent: UK roiled by labor strife, inflation

(AP Photo/Matt Dunham, File)

It is shaping up to be miserable winter for everyone in Europe. A rocky first few months of governing for new British Prime Minister Rishi Sunak are threatening to become a disaster, as the U.K. tries to buttress its already fragile economy against proposed labor strikes and walkouts in every sector, from brewers to pickle makers, nurses and hospitals to charities.

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…But Britain is bracing for much worse. Workers in critical services, including nurses, ambulance staff and railroad employees, are set to go on strike, with walkouts expected across industries every day until Christmas.

The breadth of the labor action is the worst in Britain in nearly a decade, and is set to become even more expansive, posing another challenge to Prime Minister Rishi Sunak’s government, which took office in October and is leading a country whose economy is already in a recession and isn’t expected to grow again until 2024.

On Wednesday, Mr. Sunak told lawmakers that he was working on “tough new laws” against strike action. Later in the day, the Public and Commercial Services Union, which represents government workers, announced a walkout by Border Force staff working on passport control at airports across Britain beginning on Dec. 23 and lasting eight days.

The simmering resentment of the public service employees is finally spilling out into the open after years of belt-tightening is now compounded by skyrocketing inflation and scant, expensive energy and fuel.

…Public service workers have taken to picket lines or voted to strike to demand higher wages as the country’s annual rate of inflation climbed above 11 percent in October, the highest in 40 years. Rising food prices and home energy bills are squeezing household budgets that were already made vulnerable by years of low pay growth.

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With just the railroad unions alone, something aggressive and interesting has happened. The NYT report I’ve been quoting was written on the 7th. The railroad unions had set their walk out their plans and this is what the government was telegraphing as well as the rail union head’s response:

…Over the next month, rail and Eurostar workers, bus drivers, Royal Mail postal staff, teachers in Scotland and even driving test examiners will also go on strike. For many of these workers, it’s the latest in a series of walkouts. Britain’s train network has been brought to a near standstill already several times this year. This week, the main rail union announced walkouts starting on Christmas Eve, in addition to two 48-hour strikes next week.

…As Christmas approaches, the stakes seem to be getting higher. Nick Gibb, a government minister, said in a radio interview on Tuesday that unions shouldn’t hold the country “to ransom” and urged the rail union to call off Christmas strikes. But Mick Lynch, the head of the National Union of Rail, Maritime and Transport Workers, defended the action. He told the BBC on Tuesday that the government was coordinating an attack on working people.

“It would be foolish of unions not to coordinate themselves in response to those attacks,” Mr. Lynch said.

The “government was coordinating an attack” – a week ago.

In a move that has stunned everyone, THIS is what happened this weekend.

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What it means.

The U.K. government stepped in to block a deal offering railroad workers a 10% pay increase, with an 8% raise and new terms.

…Employers had planned to offer a 10 per cent pay rise over two years to the RMT union, but were blocked by the government, which controls the industry’s finances, according to three people familiar with the matter.

Instead, 14 train operating companies offered an 8 per cent two-year pay rise, tied to a series of tough reforms in a deal which the RMT rejected within hours on Sunday evening.

In a separate dispute, infrastructure owner Network Rail offered a 9 per cent two-year rise, which the RMT has put to a vote but urged its members to reject,

And they’re playing hardball – or refusing to engage at all – with the public service unions in every single instance.

Meanwhile, the labor action calendar just fills up with pretty colors of strikes and walkouts to organize your day and errands with. Helpful “Who’s On Strike Today” planners are being offered by various government entities.

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British public sector workers are really feeling the pinch and numbers back them up…

…The disproportionate unrest among public versus private sector workers reflects the sizable gap between the two with regards to pay growth in recent years.

Paul Hollingsworth, chief European economist at BNP Paribas, told CNBC on Monday that private sector real wages (adjusted for inflation) are roughly back at the levels seen in December 2019, prior to the Covid-19 pandemic, based on September’s figures.

For the public sector, real earnings were 5 percentage points lower, and Hollingsworth suggested that the growing gap had become “unsustainable.”

…but those employees are also victims of the very tightness in their labor market that is fueling some of our own inflationary pressures here. The Bank of England uses those labor statistics much the same way as our Federal Reserve considers the Labor Participation Rate and JOLTS data (I love the way the Europeans phrase it – “economic inactivity.”).

…Part of the problem facing the British labor market, which BNP Paribas’ Hollingsworth characterized as “tight but not strong,” is a huge spike in economic inactivity among working age adults since the onset of the coronavirus pandemic.

This, Hollingsworth noted, has contributed partly to a “chronic weakness on the supply side of the labor market.”

The total number of “economically inactive” people — those neither working, nor looking for a job — between the ages of 16 and 64 rose by more than 630,000 since 2019.

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No one has anything to look forward to for some time to come.

…Britain’s economic outlook is bleak. The Office for Budget Responsibility, an independent fiscal watchdog, forecast last month that living standards, as measured by disposable household income adjusted for inflation, would fall 7 percent over the next two fiscal years, the biggest drop in records going back to the 1950s.

I’ll end on a Parliamentary brangling note, between PM Sunak and the Labour opposition leader Keir Starmer…

…and what British energy bills alone are doing so far this year.

British energy bills will jump 80% to an average of 3,549 pounds ($4,188) a year from October, the regulator said on Friday, plunging millions of households into fuel poverty and businesses into jeopardy unless the government steps in.

…”This is a catastrophe,” Britain’s leading consumer rights champion Martin Lewis said, warning that people would die if they refused to cook food or heat their homes this winter.

Bleak is a good word.

Millions of households will be paying almost a third of their income in fuel costs this spring, amid warnings that a “black hole in provision” remains for Britain’s poorest families.

The vast majority of households in some vulnerable groups – including some 70% of pensioners – will be spending a tenth or more of their income on fuel from April, when support for energy costs will be reduced.

However, the number of households paying 30% or more of their income on fuel will double from April, from 1.6m now to 3.8m. The number of households paying a fifth of their income on fuel is projected to rise from 3m to 7.5m. Overall, two-thirds of British households will be spending 10% or more of their income on fuel within the next six months.

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For public workers and the British public themselves, “discontent” may become too mild a term in short order.

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