UK faces a summer of discontent as historic inflation and real wage declines stoke strikes

LONDON — Amid political upheaval, an economic crisis and the potential for mass industrial action, Britain faces a problematic, and possibly pivotal, summer.

U.K. inflation came in at a 40-year high of 9.4% annually in June and pay packets are failing to keep pace, with real wages plunging and workers across sectors becoming more disgruntled.

The Office for National Statistics on Tuesday reported total pay increases of 7.2% in the private sector and 1.5% in the public sector in the three months to the end of May, for an overall average of 6.2%.

This led to a decline in real wages — those adjusted for inflation — of 3.7% excluding bonuses, the worst annual drop since records began in 2001.

Workers across pillars of the economy have been voting for industrial action over below-inflation pay offers — including transport workers, firefighters, doctors, nurses, teachers, postal workers, civil servants, lawyers and British Telecoms engineers.

The Fire Brigades Union said Wednesday, the day after London’s fire service experienced its busiest day since World War II, that “firefighters are at the forefront of the climate emergency.”

“The demands of the job are increasing but our resources have been under attack by government cuts for over a decade – 11,500 firefighter jobs have been slashed since 2010,” FBU General Secretary Matt Wrack added.

Public sector pay increases in the latest round of data were at their lowest level since 2017 both with and without bonuses. Base salaries rose by 1.8%. The Bank of England expects inflation to peak at around 11% before the end of the year.

“Job vacancies stand at almost 1.3 million, slightly greater than the number of unemployed people. That means if everyone seeking a job could be matched up with a vacancy, ignoring their location and skills, there would still be a shortfall,” noted Laith Khalaf, head of investment analysis at AJ Bell.

“Against such a backdrop it’s no wonder businesses are willing to cough up more to get new staff and keep existing employees on the books.”

Khalaf acknowledged that the number of vacancies fell fractionally on the last reading, signaling that a normalization of the labor market may be in sight.

“But the big concern is that the higher wages paid by the private sector will serve to entrench inflation, while the small pay rises witnessed in the public sector in the face of soaring prices will continue to stoke industrial tensions,” he added.

‘A tale of two economies’

Britain was ground to a halt several weeks ago by strike action from rail workers over working conditions, jobs and pay. A further 24 hour walkout by members of the Rail, Maritime and Transport union will take pace on July 27.

On Tuesday, more than 115,000 Royal Mail workers, members of the Communication Workers Union, overwhelmingly voted to go on strike in a dispute over pay, with 97.6% of members from a 77% voter turnout backing industrial action.

Royal Mail’s U.K. business, the country’s former state postal monopoly privatized in 2015 after nearly 500 years of government ownership, could be separated from the holding company after losing £92 million ($110 million) in the first quarter. Revenues fell 11.5% as inflation squeezed consumers into reducing online shopping, while parcel volumes were down 15%.

CWU Deputy General Secretary Terry Pullinger told the BBC on Wednesday that the 97.6% vote in favor of industrial action was a “measure of the anger” felt by Royal Mail workers.

“Royal Mail workers – key workers during the pandemic, key workers always – have had 2% (pay increase) imposed on them,” he said.

“When shareholders are being given millions of pounds off the back of what those workers have done over the past year or so, and also the leaders of the company and members of the board are giving themselves huge wages, they’re giving themselves huge bonuses, but there’s just 2% imposed on postal workers, and it’s unacceptable.”

The U.K. energy regulator Ofgem raised its price cap by 54% in April to accommodate surging wholesale prices, and analysts expect a further increase to the cap in October, which could drive inflation well above its current levels in the fall.

Lauren Thomas, U.K. economist at Glassdoor, said the country’s red-hot labor market and falling real wages mean the country is facing “a tale of two economies.”

“The number of payrolled employees and job vacancies continue to grow and remain historically high, particularly in face-to-face industries including healthcare and hospitality. However, overall vacancy growth has begun to slow,” she said.

“Economic inactivity rates fell as those who had left the job market re-entered, perhaps as a result of the cost of living crisis forcing people back to work. Even those working didn’t see relief with both real regular pay and total pay down.”

Ghosts of the 1970s

The prospect of widespread industrial action has drawn parallels to the U.K.’s “winter of discontent” in 1978-79, when almost 30 million working days were lost to strikes during a period of high inflation.

The country’s anti-strike legislation subsequently intensified and union membership dwindled in the decades since, with Conservative politicians trying to sway public opinion by characterizing union leaders as greedy.

However, recent efforts from the major unions in light of an unprecedented squeeze on working households have begun to gather momentum, and have been met with greater public sympathy.

Last week — faced with a deluge of strikes through the summer — outgoing Prime Minister Boris Johnson’s Conservative government passed a law permitting companies to replace striking workers with agency staff in a bid to undermine unions.

Speaking at his final Prime Minister’s Questions in the House of Commons on Wednesday, Johnson accused Keir Starmer, leader of the main opposition Labour Party, of having “union barons pulling his strings from beneath him” and vowed to “outlaw wildcat strikes” — a continuation of recent efforts to tie trade unionists to the government’s political opposition.