Atradius UK Strikes Report May 2023

Nicola Harris, Senior Underwriter to the UK Transport and Metals sectors at Atradius, considers the ongoing impact of strikes on the economy and businesses. Atradius UK Strikes Report May 2023 Nicola Harris, Senior Underwriter to the UK Transport and Metals sectors at Atradius, considers the ongoing impact of strikes on the economy and businesses. Anyone living and working in the UK will be all too aware of the damaging impact of high inflation in recent months and years. Pay rises aren’t keeping up with the impact of the cost of living, sparking industrial action across the UK. In February alone, 348,000 working days were lost because of labour disputes. Over three-fifths of the strikes in February were in the education sector - meaning many parents were unable to work, and often cut back their own spending as a result. [Asset Included(Id:1657029471999;Type:AT_Media_C)] The impact of strikes The current wave of strikes started with the hauliers who disputed pay and working conditions in 2021. This led to a shortage of fuel at pumps and the army being called in to supplement the shortfall of workers. It was the first salvo in widespread strike action that has since led to reductions in productivity and output. This is reflected in the most recent GDP figures: stagnant GDP in February 2023 was dragged down by strike action from teachers and the civil service. The impact of the strikes and resulting pay rises, most of which are double-digit, will feed into continued sustained high inflation. The latest figures from the Office for National Statistics (ONS), show underlying inflation at around 8%. My colleagues and I at Atradius regularly talk to businesses across a range of sectors and there continues to be much uncertainty. Even those businesses that went through strike action last year, could again face industrial action in 2023.  These businesses are already under strain, coming off the back of Brexit, the Covid pandemic, and the impact of Russia’s invasion of Ukraine. Therefore, for many, double-digit pay increases are hard to sustain.  Increased resilience The very challenges that have stretched businesses - especially Covid and Brexit - have also made them more adaptable to other disruptions, including strikes. Customers understand that disruption is part of business life these days, and that’s especially true at a time when strikes are so widespread; it tends not to be businesses in isolation that are impacted, but often many of their competitors or partners too. A lot of businesses now have coping mechanisms in place to adjust. Most notably, this includes the flexibility for large numbers of employees to seamlessly switch to home working in the event of transport or education  strikes.   As a result, some businesses have weathered strike action to a certain extent. For example, there were reports that last year’s strike action at Felixstowe, the UK’s largest container port, had minimal impact on day-to-day business; many customers, accustomed to disruption, rearranged the transport of their goods. Port owner Hutchison Ports (UK)’s Head of Corporate Affairs told the Transport Select Committee in October 2022: "The sense we got from our customers was while the strike wasn't welcome... they would deal with it like they've dealt with every other disruption…. They've dealt with the disruption without any real significant impact on supply chains." A pay deal was eventually reached with workers.          [Asset Included(Id:1657029546191;Type:AT_Media_C)]         A trade off The majority of businesses we speak to understand that they need to protect their workforce by offering pay rises amid the impact of inflation and the cost of living crisis.  With such a tight labour market – there were 1.1 million vacancies to fill at the last count - many businesses have little choice but to raise pay to keep valued employees. The last thing businesses want is to lose workers to competitors who may be offering pay deals that are in line with inflation.  However, smaller, labour-intensive businesses will struggle and public sector pay rises are lagging behind the private sector.  The impact of strikes shouldn’t be underplayed. I see the effects first hand in the transport and logistics sectors; if a business sees disruption in its core operations, affecting key customers, it could lose contracts and damage relationships. If, for example, hauliers negotiate higher wages, then every sector of the economy that transports goods or requires goods will see cost increases as well.  Most of the businesses I speak to have had so much come at them over the last couple of years that they don't have many options left in terms of additional margin they can sacrifice. Those that do have any flexibility are in negotiations for pay rises.  Widespread margin pressures and higher overheads mean we will certainly see the impact of industrial action when businesses publish their 2023 results.  So, while in some ways businesses have become more resilient and able to withstand disruption in the wake of Covid and Brexit, it’s clear that ongoing strike action is taking a tough toll . My colleagues and I at Atradius are specialists in trade credit insurance and are here to support firms in these challenging times. DM to me to find out how we can work alongside you to understand and support your business.