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Industrial Action is Back in the UK: Labor Strikes are Increasing under the Cost of Living Crisis

With inflation rising above 11%, it has become harder for employers in the UK to meet the salary expectations of employees who are asking for better pay deals to keep up with the rising cost of living. The UK experienced 75 strikes in August, which is the highest number of work stoppages occurring in a month in the country since 1990 (Office for National Statistics). Now, in many industries, workers are opting into strikes collectively, are stopping working and protesting to their employers to reach an agreement over a fair pay deal. The most significant labor disputes are in education, transportation and storage sectors. These work stoppages have caused and may continue to cause significant economic losses and disruption. In this commentary, DBRS Morningstar takes a look at the latest round of industrial disputes in the UK under the high inflation regime and their possible implications for economic activity.

Key Highlights
-- Main reason behind the increase in industrial action over the last months is the demand for higher wages due to the cost of living crisis.
-- Strikes in the transportation and storage sectors can bottleneck economic activity along the supply chain.
-- Although currently affecting a small share of workers, increasing salaries to match inflation could trigger a wage-price spiral.

Quote:
“ The cost of living crisis is leading to detrimental disruptions from industrial action in the UK and also more broadly across Europe,” said Nichola James, Co-Head of Global Sovereign Ratings. “Current economic conditions for both firms and households make ongoing disputes very difficult to resolve,” added Nichola James.