The cost of strikes to the UK economy

Across various sectors and industries, workers have been taking industrial action every working day since the start of 2024. When employees take industrial action, the UK economy takes a hit — to varying degrees depending on the industry. For example, in the nine-month leadup to February 2023, 3 million working days were lost to strikes. Rail strikes disrupt the UK economy more severely than other sectors due to delays and cancellation of travel plans. While for many they are simply an inconvenience, they have a significant impact on economic activity. For example, rail strikes in 2023 cost the UK one billion pounds. And yet rail strikes continue to be an ongoing issue affecting commuters in particular.
Although it is difficult to know definitively, the RDG has estimated that the rail sector lost 775 million pounds in revenue as a result of the strikes between June 2022 and January 2024, with the most recent strikes adding another 50 million pounds to that figure.
Similarly, UKHospitality estimates the lost business amounts to more than four billion pounds as a result of rail strikes, preventing people from getting to work and reducing footfall in restaurants, bars and hotels. On top of that, UKHospitality estimated a further hit of 350 million pounds.

 

The right to strike

Workers have a right to participate in industrial action when their union follows strict conditions. This means strikes are legally permissible as long as a proper ballot is carried out, sufficient notice has been provided and it concerns a trade dispute. That said, some industries are more vulnerable to strikes than others. However, no matter which industry is pursuing industrial action, the effects are tangible and profound.

 

Widespread dissatisfaction

In February 2024, the UK was officially declared to have entered a recession at the end of 2023. According to the Office for National Statistics, gross domestic product fell by 0.3% in three months. Although strikes dampen economic activity, they do not cause a recession as a whole.

It is impossible to predict how the future will unfold as strikes continue into the coming months. With this in mind, businesses should focus on their agility and adaptability to unforeseen circumstances.

 


The antidotes to widespread strikes

Major strikes affect numerous companies and industries – even if only indirectly – and the impact can be massive. This includes B2B and purchasing. For example, if there are delays or cancellations in transport and logistics via rail, the delivery of large quantities of important goods and merchandise to business partners may be disrupted.
But how can the impact of strikes be mitigated? The issue is that it’s almost impossible to predict when and where strikes are going to take place. However, the risk is substantially higher in the context of regular wage negotiations. Risk management teams should therefore keep periodic wage negotiations on their radar as well as local, national and global economic situations. In this way, potential crises cannot necessarily be avoided — particularly not on a global level — but they can be recognized ahead of time. This is particularly important for industries with typically long, multinational supply chains. These can be extremely sensitive to conflicts or strikes in other countries. This is demonstrated by the COVID-19 pandemic, the war in Ukraine and the recent tractor blockades in France which are now being replicated in large ports such as Dover. It therefore makes sense to have several suppliers in your portfolio. Should one fail, another can step in.

 At the same time, companies should take care to minimize the number of stakeholders in a supply chain. Although this increases the dependency on individual players, it makes the supply chain simpler. Disruptions can then be more easily located and remedied, or at least mitigated.
Additionally, the distances involved should be as short as possible. The closer suppliers and customers are, the more flexible it is to switch to alternative means and routes of transport. In the event of a rail strike, perhaps a lorry company can temporarily take over deliveries. Alternative options should also be considered for planes and ships. It is important to obtain information at an early stage and plan for potential replacements.

 The same applies to business trips. It is important to check which appointments can be postponed or whether they can take place virtually. Likewise, it is beneficial to embrace hybrid working to reduce vulnerability to rail strikes and enable employees to complete their work from home.

 The more prepared the risk management system is for strikes, the more resilient companies can be as they respond to them. However, countermeasures have their limits. If a strike lasts a very long time or is widespread, it becomes increasingly difficult to absorb the impact.