The UK economy: an ever-changing picture of work in progress, part three.

In what follows I wish to make the case that persistent unemployment is not some inevitability whenever the UK is shocked. To do so, I will cast my mind back to the UK economy as I have experienced it, studied it and worked in it. For each instance – BEFORE THIS – that the UK suffered a major labour market failure, I will argue that events could at worse have been moderated and made much less protracted, or at best avoided entirely. Having made a case for why the UK labour market is resilient when actually not imperilled by poor leadership or allowed to self-heal without restrictions, I will argue the UK can and will recover from the present unavoidable crisis extremely quickly, certainly faster than many are warning. It will recover swiftly thanks to it being unencumbered by ‘frictions’ in the ways it once was and also because it is in the capable independent hands of the Bank of England and a Chancellor who is best in class. With class in mind, let me begin by reflecting back at the now long-retired angry young men of Britain’s manually skilled working-class past.

As the world’s energy costs surged, so the high job security, which had been so hard to forge across the UK workforce, was suddenly shattered

When the hard-working and equally hard-living Arthur Seaton – brilliantly portrayed by Albert Finney – hit British cinemas in the 1960 kitchen-sink drama Saturday Night and Sunday Morning, the UK had reached essentially full employment. A time when those who wished to undertake relatively well-paid – albeit mundane – work, could quickly get it. This would remain the case for practically the entire decade and indeed continue into the first three or so years of the 1970s. Then the first OPEC shock struck. As the world’s energy costs surged, so the high job security, which had been so hard to forge across the UK workforce, was suddenly shattered. If I can be perfectly blunt, an element of the UK labour market’s suffering through the 1970s and 1980s was a necessary ill. It involves the painful but essential removal of sectors the UK had grown out of, so as to allow the construction of those better suited for its post-modern purpose. This frank truth reluctantly accepted, the pain inflicted was made so much worse than it arguably need have been. I make this claim because confrontations between dogmatic governments – Tory (Heath), Labour (Wilson), Lib/Lab (Callaghan) and again Tory (Thatcher) – and intransigent industrial trade unions, meant that rather than much needed collaborative thinking, the UK was consumed by conflict.

From the perspective of government there was a failure to focus on delivering and securing: efficient markets to provide accessible homes, where workers were in greatest need; the education and skills demanded by emerging sectors; and the affordable funding to finance matters. Were these to have been the immediate focus of policy in Whitehall, their delivery would have reduced the frictions and lowered the barriers that were holding back the UK’s economic regeneration. Of course central government alone was not to blame. Powerful and entrenched trade union leaders did not accept ‘their particular’ industry could no longer competitively justify its traditional considerable scale within the UK economy. This all came to a head with the Miners’ Strike of 1984, which not only pitted (sic) the State against the National Union of Miners (NUM), but miner against miner, of which at the time there were 170,000 (down from 600,000 in 1960, itself half the level of 1920).

As we all too painfully know, the consequence of conflict between those in the CBI’s ranks versus others aligned under the colours of the TUC, was all too often febrile industrial unrest, ‘Winters of Discontent’, and high and protracted unemployment. Those of us who lived in those days would never wish to see them again. 

So much has changed for the better across the UK economy since the days when shocks to it lasted seemingly interminably

Looking back then to the 1980s we see that, whereas the UK’s GDP began to record quarter on quarter growth from 1981Q2, the rate of joblessness continued to increase until 1984Q2. Thereafter numbers unemployed thankfully began to ease lower, albeit frustratingly slowly, creating some hope that the UK labour market was finally getting itself fixed for good. Sadly, with so many crucial economic policy levers still in inept political hands, this hope was to prove forlorn. 

Consider, for instance, the steep protracted increases in joblessness suffered from 1989, and then again from 2008. These were in their different ways easily avoidable and attributable to first a Tory Chancellor (Lawson), then a Labour one (Brown) and hardly helped by the Conservatives (Osborne and Hammond). In their different ways, each of these made glaring policy errors that needlessly allowed economic crisis to strike and then persist. For even after initial policy errors allowed labour market crises to strike, additional mistakes ensured they persisted far longer than would have been the case if political dogma and poor regulation had not interfered with economic good sense. This all brings me to March 2020 and the onset of this existential crisis.

Thankfully, so much has changed for the better across the UK economy since the days when shocks to it lasted seemingly interminably. 

The UK now enjoys a residential market with sufficient flexibility to allow the flow of labour from where it is unemployed to where there will be demand for workers; boasting a large and growing private rental sector, standing alongside but not in the shadow of a sizeable healthy owner-occupancy market. And where the latter was once plagued by flexible fast-moving mortgage rates and high loan to values, it is now filled with fixed rates and UK householders enjoying greater equity in their homes than ever before. For its part, the UK labour market is home to skill sets which match job roles being created. I could go on and point to commercially and entrepreneurially low costs of borrowing and improved transport/technological links, which now allow the UK economy to quickly recover from shocks. As I have said then, there is so much fundamentally and structurally different now from the past in and across the UK economy, and so much for our economic better.

To read The UK Economy – A picture of change, part one, visit https://www.propertychronicle.com/the-uk-economy-a-picture-of-change-part-one/. To read part two, visit https://www.propertychronicle.com/the-uk-economy-an-ever-changing-picture-of-work-in-progress