dear reader,
One of the joys of getting older is telling younger people how much easier they have it these days. Current strike action in the UK has given me an opportunity. Fellow journalists who use the cliché “winter of discontent” are a target too tempting to resist.
My message to bright-eyed young experts is simple: you won’t recognize a winter of discontent when it comes up and bites you. I am old enough to remember the dark months of 1978-79, given their aptly Shakespearean title by the tabloid Sun newspaper. Industrial action doesn’t even come close at the moment.
This is of interest to the dwindling group of foreign direct investors in the UK. You’ve stuck it out so far, through Brexit and the craziness of Liz Truss’s brief premiership. Train cancellations and industrial action by driving instructors represent a lower level of downside to the investment case for the UK.
The difference is reflected in the fact that no one is currently citing the ten-year gilt yield as evidence of national doom. Just for the record, that’s a relatively healthy 3.5 percent.
Most UK disputes involve public sector staff who are upset that real-term pay cuts will deepen due to inflation, such as nurses. Rail workers, who tend to work for private companies employed on government contracts, staged frequent stoppages. So are postal workers whose privatized employer, London-listed International Distribution Services (also known as Royal Mail), has public service obligations.
Earlier this week, the government, the ultimate paymaster for most of these groups, finally held talks with union leaders, something it had previously avoided.
Back in 1978-79, strikes broke out across the country and across the public and private sectors. Many of these were wildcat actions, which were not strictly prohibited at the time. Garbage not collected. The dead went unburied. Notably, Ford settled a dispute with workers by giving them a 17 percent pay raise.
“The current situation is nothing like the late seventies and early eighties in terms of the scale and scope of people going on strike,” said Alex Bryson, a labor market expert at University College London.
My main memory of those times is of my own frivolous teenage disappointment at the lack of power outages. We had those during miners’ strikes earlier in the decade. They were a lot of fun when you were a kid. Families told stories by candlelight instead of slumping in front of their TVs. For adults, it was less fun to keep the lights on.
This chart gives an idea of ​​how many strikes British workers would have to take to rival the labor uprising of 43 years ago.

My aim is to introduce context, not to minimize problems NHS patients have in treatment or disruption of individual businesses. White collar employees are ready to work from home. But public transport strikes have dealt a major blow to some companies in the construction, hospitality and leisure sectors. Deutsche Bank calculates that up to 1.5 million working days were lost in the UK during December.
Recent industrial action may have shaved 0.25 per cent off UK GDP, estimates Simon French, chief economist at brokerage Panmure Gordon. However, he admits this is “small beer” compared to the impact of Brexit and runaway inflation.
French points out that UK output growth was higher in the strike-ridden 1970s than the Bolly-swigging 1980s. The difference was that profits flowed mostly to labor in the first decade, but to capital in the second.
Should international investors be concerned that the flow is reversing? Rare. Membership of powerful trade unions has fallen in the UK, as elsewhere. This is implicit in the reduced premium paid to union members compared to non-union staff. This reflects the prohibition of the closed shop and the decline of manufacturing industries where collective bargaining has had a real impact.

International capital was wary of the United Kingdom in the 1970s. These days there appears to be little point in avoiding shares in British companies that are united for that reason alone. IDS agreed to a 3.7 per cent back pay rise before Christmas. His biggest problem is his disappointing performance in package deliveries. British train companies, typically units of larger groups such as Deutsche Bahn, are participants in a dysfunctional industry where economic incentives have been misaligned for years.
Jagjit Chadha, director of the National Institute for Economic and Social Research, says following the Truss administration’s disastrous mini-budget, the international community sees the UK as “an example of how not to do things”. Unresolved trade union disputes in the public sector is therefore a problem that Prime Minister Rishi Sunak needs to address carefully. He must find a way to soften the blow of inflation to household incomes without wrecking his already strained budget. Lower energy costs should give him extra money to play with.
If industrial disputes continue and involve more employers in the private sector, it will be time to worry. International investors will pay close attention. Which is more than I can expect from colleagues when I start sharing my wisdom about the three-day week, Red Robbo and the Grunwick dispute.
Memories are the prerogative of older people. Ignoring those memories is the prerogative of younger people.
enjoy the rest of your week,
Jonathan Guthrie
Head of Lex
Further reading:
Sarah O’Connor on why pay negotiations are not a winner/lose situation.
Raghuram Rajan on the difficult relationship between central banks and credibility.
Department of shameless self-promotion: my own column on the risk of sanctions-busters using gold.