Len McCluskey At Trade Unions For Cuba Conference


2 November 2019

Good morning comrades and friends. I feel especially proud and privileged to be invited to speak here today.

Here at this conference marking:

  • the 60thanniversary of the Cuban Revolution Fand most particularly
  • the 80thanniversary of the founding of the Cuban trade union federation, the CTC.

But before I go on can I personally acknowledge the presence of:

Carmen Rosa López Rodríguez, the Deputy General Secretary of the CTC, and the rest of her delegation and

  • my great friend, Her Excellency Teresita Vicente Sotolongo, the Cuban Ambassador to the UK who sadly will be leaving us soon.

Can I also congratulate Rob Miller and his team at Cuba Solidarity Campaign in putting on today’s event? A truly great event as we’ve come to expect from CSC.

Of course I was a child in 1959 but I do remember reports of what had happened in Cuba and how many in the dock workers’ community where I was brought up welcomed the news.

Similar scenes were reported from mining districts when news of the Russian Revolution first reached Britain in 1917, miners on the streets crying tears of joy.

And what news it was to welcome.

A US backed fascist dictatorship, installed to protect US agricultural plantations and mafia run gambling and prostitution operations, had been toppled by a lightly armed, small in number, guerrilla army.

No one in the elite really believed it had happened; they took off for Florida expecting to come back to their mansions and plantations in a couple of months when the Revolution had blown over.

How wrong they were. Because the Cuban Revolution was not just one corrupt group swapping power with the previous corrupt group – the Cuban Revolution was a socialist revolution embarking on a course of national and international liberation.

That’s what made it different.

I’m sure you will hear here today details of the great social advances that have been made in Cuba since 1959:

  • literacy rates superior to many countries in the west
  • free education for all from nursery to university
  • free health care, low infant mortality and major advances in biosciences.
  • But the issue that most keenly matters to me is the development of labour rights in Cuba.

From trade union activists being tortured and executed under Batista today workers and their unions, organised by the CTC, have a special place in Cuban life.

Workers and their unions have to be fully consulted and involved in decision making at workplace level.

The CTC and its affiliates are included in the great economic decisions that have to be made by the government.

When the new labour code was being drafted, the CTC organised innumerable workplace meetings of union members who are articulated demands for change and, most importantly, amendment or rejection of the government’s proposals.

You may know that I have often given the government here advice on its labour laws but unfortunately I do not seem to enjoy the same sway with our government as the general secretary of the CTC does with his.

The setting a good example has not been welcomed by Cuba’s northern neighbour.

Since 1962 an illegal blockade of Cuba has been enforced by the US.

It is estimated that this blockade has cost the Cuban economy at least $922 billion

Money that could have been spent to further benefit the lives of Cuban workers and their families.

Although there was an apparent freeze under Obama the blockade remained in place and has been hardened under Trump causing real hardship to everyone in Cuba.

The blockade is of course an attempt at regime change, to bring back big US agrifood industry and the mafia, to return Cuba to the dark ages of Batista.

As socialists, our commitment to international solidarity demands that we stand by Cuban workers, their unions and their revolution.

Building on the unprecedented solidarity work for the Miami 5 by the unions here in Britain Unite was able to mobilise unions in the US to this cause.

Our campaigning work, reaching up to the highest levels of government and into the law courts, helped break the wall of silence and eventually led to freedom for the 5.

International solidarity is course reciprocal and in the past 60 years the Cubans have been to the forefront.

In 1988 members of the Revolutionary Armed Forces halted the South African advance northwards into Angola at Cuito Cuanavale; an action remembered by Nelson Mandela:

The decisive defeat of the aggressive apartheid forces in Angola destroyed the myth of the invincibility of the white oppressor. The defeat of the apartheid army served as an inspiration to the struggling people of South Africa.

More recently Cuba’s international solidarity has taken a more peaceful turn.

Cuban medical brigades have been the first into places of natural disaster or serious epidemic – Pakistan, west Africa, Haiti and Ecuador.

Operation Miracle has restored the sight to 3.4 millionpeople in Latin America, including the Bolivian solider who executed Che Guevara.

Since 1959 Cuba has been a beacon to progressive forces in Latin America and the developing world.

In the early years of this century progressive governments came to power all across Latin America; most recently in Mexico, and down as far as Argentina, many acknowledging their Cuban inspiration.

Times have changed and much of that advance has been reversed by:

  • US led attempted regime change in Venezuela and Nicaragua
  • the jailing of Lula and electoral loses in Brazil and Ecuador
  • soft coup in Honduras and Paraguay.

But it’s not over by any means. In October this year:

  • the people of Ecuador defeated the IMF
  • 1 million people in Chile marched against neo-liberalism
  • Evo Morales was re-elected as president of Bolivia
  • the Left has won the presidency of Argentina

And Cuba stands firm in the face of unprecedented economic attack from the US.

In closing, I’d just like to share a short anecdote with you.

Some years ago, before the time of Evo Morales, a leader of the Bolivian trade unions came to visit our office. “What would you say is the most important task?” he was asked. “The defence of Cuba” was his reply.

Comrades, we can demand of ourselves nothing less than that.

Thanks for listening.

Facebook Twitter Plusone Linkedin Pinterest Email
Posted in International Trade Unions, Trade Unions, Unite The Union, Workers Uniting | Leave a comment

Community Wealth Building Briefing From Unite

Facebook Twitter Plusone Linkedin Pinterest Email
Posted in Trade Unions | Leave a comment

Uni Finance Declaration of Support For Lula

Facebook Twitter Plusone Linkedin Pinterest Email
Posted in Trade Unions | Leave a comment

Thirteen unions urge UK government to condemn Turkey’s invasion of Syria – and act to avert ethnic cleansing and potential genocide

Trade unions representing millions of UK workers and their communities have demanded that prime minister Boris Johnson deploy the UK’s influence to prevent a humanitarian disaster as a result of the Turkish invasion of north and east Syria.

Thirteen trade unions and a leading law firm are warning that President Trump’s ‘appalling’ abandonment of the fragile region will see Turkey seek its own military and strategic advantage which will `undoubtedly lead to ethnic cleansing and genocide of the Kurds as well as a resurgence of ISIS’ in the region.

The move by the unions is a major display of solidarity with those forces fighting against repression in the region.  The unions say that the UK must show its clear and utter condemnation of Turkey’s invasion, calling for a no fly zone and international force deployment.

Having recently returned from the region, Simon Dubbins, Unite’s director of international, said: “We have been part of a parliamentary and union delegation to this region.  It is plain for all to see how extremely dangerous the situation is and the human misery that will unfold unless the international community comes together and stands as one against this appalling and unwarranted aggression.”

In a letter to prime minister Boris Johnson the unions urge the UK government to condemn outright the Turkish aggression, reminding both  the UK government and the international community of the debt owed to the Syrian Democratic Forces for their `sacrifice in stopping and defeating ISIS’.

The full text of the letter is below.

Dear Prime Minister,

We are writing in relation to last Sunday’s appalling announcement by President Trump that he intends to immediately withdraw US troops from Syria. This is a green-light to a Turkish military invasion of North and East Syria, which, as we have already seen in Afrin, will undoubtedly lead to ethnic cleansing and genocide of the Kurds as well as a resurgence of ISIS.

The international community owes the Syrian Democratic Forces a debt for their sacrifice instopping and defeating ISIS and building peace and stability in the region, they are our friends and allies.

We therefore call on the UK government to immediately condemn Turkey’s threats of invasion and to work with the international community to deploy an international force and enforce a No-Fly Zone to prevent the imminent catastrophe and protect civilian lives.

If the Turkish invasion is not stopped the SDF will be forced into a long and bitter war for survival against the second-largest NATO army. In the resulting chaos tens of thousands of

ISIS fighters will escape their current internment and resume their barbaric acts of terror across the globe.

We demand that the UK government take action to prevent an invasion of North and East Syria by Turkey and protect the very people who have protected us.

Given the gravity of the situation we would appreciate an immediate response.

Yours sincerely,

Len McCluskey – General Secretary, Unite the Union

Tim Roache – General Secretary, GMB union

Dave Ward – General Secretary, Communications Workers Union

Mark Serwotka – General Secretary, Public and Commercial Services Union

Mick Whelan – General Secretary, Associated Society of Locomotive Engineers and Firemen

Manuel Cortes – General Secretary, Transport Salaried Staffs’ Association

Mary Bousted – Joint General Secretary, National Education Union

Kevin Courtney – Joint General Secretary, National Education Union

Paddy Lillis – General Sectary, Union of Shop, Distributive and Allied Workers

Mick Cash – General Secretary, National Union of Rail, Maritime and Transport Workers

Mike Clancy – General Secretary, Prospect

Ronnie Draper – General Secretary, Bakers Food and Allied Workers Union

Larry Flanagan – General Secretary, Educational Institute of Scotland

Doug Nicholls – General Secretary, General Federation of Trade Unions

Stephen Cavalier – Chief Executive, Thompsons Solicitors

Facebook Twitter Plusone Linkedin Pinterest Email
Posted in International Trade Unions, Labour Party, Politics, Trades Union Congress, Unite The Union, Workers Uniting | Leave a comment

UK auto makers prepare to shut down again fearing No Deal Brexit disruption

By Professor David Bailey, Professor of Business Economics at Birmingham Business School at University of Birmingham, Visiting Professor at Centre for Brexit Studies and Senior Fellow at UK in a Changing Europe. Republished with permission from Centre For Brexit Studies and David Bailey.

Despite Michael Gove’s claims last week that the automotive industry was ready for a no deal Brexit, Jaguar Land Rover has become the latest firm to say that it will shut down its UK plants in November in an effort to mitigate potential disruption from a no-deal Brexit.

JLR’s Chief Exec Ralf Speth said the firm had no choice but to stop production lines at its four UK plants (Solihull, Castle Bromwich, Wolverhampton and Halewood), stating that “We cannot think about it, we just have to do it. I need 20 million parts a day and that means I have to make commitments to my suppliers. I have to have every and each part available and I have to have it just in time.”

The latter point illustrates again the vulnerability of automotive and manufacturing that rely on a ‘Just in Time’ (JIT) supply chains to a No Deal Brexit that could cause customs delays and supply chain disruption.

The JLR plants produce around a third of total UK car output and around half a million engines that go into those cars.

A long lag-time in ordering components from suppliers means the firm can’t reopen the plants at short notice if Brexit is delayed beyond October 31. “We will have to close. We cannot switch off and on again” said Speth.

Essentially, customs delays under a No-Deal Brexit would throw a big spanner in the works of JIT systems commonly used across UK and EU manufacturing.

JLR isn’t alone. Toyota has said it won’t build cars at its Burnaston plant on 1st November (sources tell me that it will review its position every three days given uncertainty over the flow of components). BMW will halt production at its Oxford plant on 31 October and 1 November and has said it may send home workers on unpaid leave. Peugeot-owned Vauxhall is also likely to shut its plants.

It’s the second time this year that car firms will have shut down because of Brexit uncertainty. Back in April much of the UK car industry was idled in anticipation of the original end of March Brexit deadline. Firms brought forward planned maintenance shutdowns and took extended breaks in an effort to mitigate the cost of disruption caused by Brexit. Output fell by 45% in April compared with a year earlier.

In recent days several national auto industry bodies, including the German car industry body the VDA, have said that Brexit would have a “seismic” impact on car makers on both sides of the channel.

In the UK, the Society of Motor Manufacturers and Traders (SMMT) reckon that car makers in Britain have spent hundreds of millions of pounds preparing for an exit, with some of that money spent in the weeks leading up to the end of March.

Responding to Gove’s claim that industry was ready for Brexit, the SMMT’s CEO Mike Hawes tweeted that “Auto has been consistent & clear: Spent over £1/2 bn on prep but can’t fully mitigate serious risks. Need deal & free & frictionless trade.”

An SMMT press release earlier this week stated that: “A ‘no deal’ Brexit would have an immediate and devastating impact on the industry, undermining competitiveness and causing irreversible and severe damage… (and) risks destroying this vital pillar of our economies.”

JLR has repeatedly stressed that No Deal would cost the firm £1.2bn and threaten a pipeline of tens of billions of pounds of investment in the UK. Before he was PM, Boris Johnson earlier this year dismissed Ralf Speth’s concerns in an LBC radio interview, suggesting that it was not certain that JLR’s Chief Exec knew more about the car industry than he did.

Another major issue in the event of No Deal would be tariff barriers for automotive of around 10%; this would push up import and export prices of cars, and impact on exports and hence production in the UK.

In our recent book Keeping the Wheel on the Road: UK Auto post Brexit, Ian Henry forecasts a short-term production hit from a No-Deal of at least 175,000 cars a year (that’s not including the Honda closure), which is over 10% of UK car output.

Longer term, there is a significant risk that some firms would consider shifting production activities outside of the UK such that the loss of output could be much higher. Honda and Ford have already announced plants closures in the UK for a variety of reasons; Brexit uncertainty being seen by many as one factor.

Other assemblers may follow in the event of a No Deal, especially when new model production is being planned. Peugeot has already stated bluntly that No Deal would mean no investment at Vauxhall at Ellesmere Port (the current Astra model is due to be replaced in 2021).

That’s before we get to Toyota, which began new Corolla production last year at its plant in Burnaston, Derbyshire (an investment decision which goes back before the 2016 Referendum). Like Honda, the plant has been operating below capacity in recent years, and there is a big question mark over its future when production of the current Corolla ends in 2024.

It’s worth noting that there is plenty of spare capacity in the European auto industry. Other countries would jump at the chance to attract such assembly activity, hoping that that they could also pull in significant (especially higher value) parts of the value chain. The employment effects of losing assembly operations could be significantly higher than just the jobs associated with major assemblers.

Exiting the EU in an orderly way with a Deal, minimal trade friction and a transition period remains vital for the British auto industry. No Deal would be very damaging to output, jobs and investment.

Facebook Twitter Plusone Linkedin Pinterest Email
Posted in Blogs, Economics, Labour Party, Media, Politics, Trade Unions, Trades Union Congress, Unite The Union, Workers Uniting | Leave a comment

IndustriALL Europe makes the case for collective bargaining in new campaign

The giant European trade union federation IndustriAll Europe, which covers 7m manufacturing, mining and energy workers has launched a campaign which aims to demonstrate the positive impact of collective bargaining in delivering a better life for working people.

The campaign is seen as a major step for European trade unions in co-ordination and co-operating on the issue of collective bargaining.

The campaign will run under the slogan ‘Together At Work’ through to March 2020 and is aimed at all workers with a focus on women, young people and workers in precarious employment.

Amongst the reasons for the campaign, are the fact that collective bargaining is under attack by employers  and some governments in Europe. IndustriALL Europe says that collective bargaining is a key to higher pay and better working conditions.

Luc Triangle, IndustriAll Europe’s General Secretary told a media launch on September 26, “Over the past decades, collective bargaining has been eroded throughout Europe. Following the 2008 crisis collective bargaining was attacked by both national governments and European institutions, as a means to lower wages and restore profitability.

“The increase in individual contracts has left many workers unable to stand up for themselves and led to a rise in precarious work and in-work poverty,” he added. “This has led to a vicious cycle where lower bargaining coverage undermines the power to act collectively and to improve conditions for all workers in society. This also erodes social cohesion and now threatens the future of our social security systems, as workers can no longer afford, and employers no longer have to, contribute sufficient to ensure adequate protection.”

“Our campaign will clearly demonstrate the advantages for workers, employers and society of a model of workplace relations with collective bargaining at its heart. This means strong trade unions and employers willing to sit around the table. Together at Work will show the way forward and identify the measures needed to support collective bargaining.”

Unite is backing the campaign, and Unite assistant general secretary Tony Burke said, “The fact is that collective bargaining has been under attack by employers and the UK government for four decades.

“Back in 1979. 71% of UK workers were covered by collective agreements including national sectoral agreements and company-wide agreements covering pay, working hours, holidays, overtime and shift arrangements, apprentices pay and many other issues. 11% of workers were also covered by wages councils which protected some of our lowest paid workers in sectors such as agriculture and box making.

“UK Government statistics today suggest that collective bargaining has been pushed back and that just 26% of UK workers are covered by collective agreements with only 14.7% of workers in the private sector covered by collective bargaining, with 58.9% of the public sector now covered by collective bargaining,” Burke explained.

“This has been bad news for UK workers. There is massive inequity in terms of pay and conditions between the wealthy and ordinary working people, zero hours contracts have taken hold, low pay is endemic with people having to work two or three jobs just to make a living.

“However, the Labour Party’s announcement of its  plans to roll out sectoral collective bargaining and ban zero hours contracts when it takes office is great news,” he added.

“Shadow Minister for Employment Laura Pidcock MP announced  to both the TUC and Labour Party conferences in September an ambitious programme of minimum and legally binding pay, terms and conditions for every employers and every work in a sector.”

Each month, IndustriALL Europe will focus on a different set of messages aimed at workers, employers, women, young people and others, telling real stories about working people, their struggles and their jobs and highlighting the concrete benefits that trade unions bring through collective negotiations with employers through a combination of video and printed material for use in the workplace and social media.

Facebook Twitter Plusone Linkedin Pinterest Email
Posted in Blogs, Employment Rights, European Trade Unions, International Trade Unions, Politics, Trade Unions, Unite The Union, Workers Uniting | Leave a comment

UK Unions Warn: ‘This Is A No Deal Coup’

”The claim that the government is considering proroguing parliament in September in order to stop MPs debating Brexit is entirely false.’’ Government statement to the Observer newspaper.’

British trade unions reacted furiously and condemned the Johnson government’s actions in suspending parliament yesterday as a ‘No Deal Brexit Coup’ which will damage jobs and working class communities while Johnson and his cronies will be ‘sitting pretty’.

Unite’s Len McCluskey accused prime minister Boris Johnson of a ‘no deal Brexit coup saying:“Johnson’s plan to shut parliament is nothing short of a no deal Brexit coup which imperils the livelihoods of millions of workers and the future prosperity of communities across our nations.

“With the future of places such as Vauxhall’s Ellesmere Port plant hanging by a thread, wrapping the suspension of parliament up with empty promises on education, police and the NHS is an insult to voters desperate for decent public services and a reversal of austerity. 

“Johnson knows full well that a no deal Brexit will devastate our public finances and whole swathes of the economy. Have no doubt it will be Johnson and his friends in the wealthy elite who will be sitting pretty in the event of a catastrophic no deal Brexit, while working class communities pay the price.

McCluskey called for a General Election: “Whichever way people voted in the Brexit referendum, they did not vote for our democracy to be shut down and to lose their jobs. The prime minister should call a general election rather than silencing parliament to push through a disastrous no deal Brexit. I urge all sensible politicians from all parties to stand up and come together behind Jeremy Corbyn to block this no deal Brexit coup.”

Unison’s Dave Prentis said that the government actions smacked of a dictatorship with the government treating the UK’s future like a political plot: “This outrageous manoeuvre has been made to silence all opposition in the most dictatorial way. Our parliamentary democracy is the envy of the world, but it’s being stamped upon and disregarded by a Prime Minister who’s not gone near a public vote.

“Boris Johnson is treating the future of the UK like the plot of a far-fetched political TV drama. The country must be asked for its view on Brexit right now. That’s the only way.”

The TUC General Secretary Frances O’Grady said:  “This is a deliberate ploy by the prime minister to duck basic democratic scrutiny, at a time when people’s jobs and livelihoods are on the line. By denying parliament a voice, this government is treating the people with contempt.

“The effects of crashing out of the European Union without a deal would be felt for a generation. People and parliament together can stop this.

“We’ll support any democratic initiative to stop a disastrous no-deal whether through legislation, a general election or a popular vote.”

Train drivers union ASLEF general secretary Mick Whelan warned of civil unrest: “Whatever your views on Brexit, the democratic process must underpin what is done in all our names — or civil unrest will be the result.

“It is disturbing that a Prime Minister, who only has a mandate from the Conservative Party and not from the electorate, is trying to undermine the foundations of our democracy.”

 

Facebook Twitter Plusone Linkedin Pinterest Email
Posted in Blogs, Labour Party, Media, Politics, Trade Unions, Trades Union Congress, Unite The Union, Workers Uniting | Leave a comment

Brazil Solidarity Initiative Statement : Bolsonaro & The Destruction Of The Amazon

We condemn Bolsonaro’s destructive plans for the Amazon, and the huge increase in illegal logging and mining since his inauguration. At the time of the rise of the far-right in Brazil, Bolsonaro’s close links to Brazil’s huge agricultural lobby were well known. The levels of destruction that we are witnessing today are a direct result of his presidency.

The Amazon rainforest is a vital environmental resource, it’s destruction will not only have hugely damaging ramifications in Brazil, but around the globe as we look to Governments to tackle the climate emergency.

We call on the international community to challenge Bolsoanro’s agenda and to recognise that without the coup against the elected president Dilma Rousseff in 2016, and the political persecution and jailing of Lula da Silva, the far-right would not be in power today.

Tony Burke is Assistant General Secretary of Unite the Union and the Vice-Chair of the Brazil Solidarity Initiative

Facebook Twitter Plusone Linkedin Pinterest Email
Posted in Blogs, European Trade Unions, International Trade Unions, Labour Party, Solidarity, Trade Unions, Trades Union Congress, Unite The Union, Workers Uniting | Leave a comment

How To Save Harland & Wolff

The future of Belfast’s Harland & Wolff shipyard could be guaranteed if the Government were to award the contract to build aircraft carrier support vessels to a UK Consortium.

The Confederation of Shipbuilding and Engineering Unions (CSEU), has been campaigning hard to get the government to award the Fleet Solid Support Ship (FSS) contract, which is worth £1.5bn, to a UK consortium. Instead, the work has been put out to international tender by the MoD who have invited shipyards from Italy, Spain, Japan and South Korea to bid for the work.

The UK consortium will use the same manufacturing process and skills base to build the support ships as was used for the Queen Elizabeth Class Aircraft Carriers, which utilised shipyards in every part of the country. Placing the contract in the UK will safeguard not just the jobs in Belfast but tens of thousands of shipbuilding jobs in every part of the UK. The alternative will be shipyards falling like dominoes. The question is who will be next?

The decision to put the FSS competition out to international tender has attracted controversy and has been criticised by unions and MPs of all the main parties in Northern Ireland and the UK as well as the Defence Select Committee. Bids closed last month and the British based Team UK consortium, which includes BAE Systems, Babcock, Cammel Laird and Rolls-Royce is facing competition from Fincantieri (Italy), Navantia (Spain), Japan Marine United Corporation, and Daewoo Shipbuilding and Marine Engineering (South Korea).

The contract will provide up to three ships designed to supply dry stores such as ammunition, explosives and food to Royal Navy ships at sea, whilst potentially under fire in war zones.

Ian Waddell, General Secretary of the Confederation of Shipbuilding and Engineering Unions, has written to both Boris Johnson and Ben Wallace and said:

“We have been warning for some time that the UK shipbuilding industry is facing a crisis as workload subsides following the Carrier project. Appledore has already closed, now the iconic Harland & Wolff is going into administration.”

“Other sites will follow if the government does nothing.”

“We fully support the campaign being run by the workforce and local unions to keep the site open and for it to be nationalised in order in order to allow it to bid for commercial work we know is out there.”

“All that workers are asking for is support to allow them to bid for and win work in the short term so that skills can be maintained for the long term in a yard vital to the FSS project.”

“Awarding FSS to Team UK would provide long-term stability for the industry and Harland & Wolff could play an important role in that and other future projects, such as Type 31 frigates.”

“Failure to do so will see up to 40,000 jobs be put at risk throughout the supply chain and the closure of other iconic shipyards.”

If you believe in the British shipbuilding industry – then sign the letter and tell ministers to build our ships in Britain https://keepbritainafloat.org/you-can-help/

Facebook Twitter Plusone Linkedin Pinterest Email
Posted in Trade Unions | Leave a comment

Brexit, Productivity And Competitiveness

Professor David Bailey, professor of economics and Birmingham Business School.

By Professor David Bailey, Professor of Business Economics at Birmingham Business School at University of Birmingham, Visiting Professor at Centre for Brexit Studies and Senior Fellow at UK in a Changing Europe.

Re published from original blog on July 29th and used with permission.

From the 1980s through to the early 2000s, UK productivity grew reasonably well. The measure of economic output per hour of work rose by about 2% a year, on average, before the 2008 financial crisis.  Since then, productivity growth has been dismal; for example in 2018, Office for National Statistics (ONS) figures showed labour productivity growing by only 0.5%.

The UK’s poor record in productivity growth since the financial crisis stands in contrast to its recovery from previous downturns, when productivity initially fell, but subsequently recovered to the previous growth trend.  The Office of Budget Responsibility thought the same would happen this time and has repeatedly forecast returns to more robust levels of productivity growth. This hasn’t materialised, however.

Productivity is seen as an important driver of improved living standards over the long term, enabling companies to pay higher wages as they are can produce higher revenues with the same or fewer resources.

As Paul Krugman once famously puts it in his 1994 book The Age of Diminished Expectations,“Productivity isn’t everything, but, in the long run, it is almost everything.  A country’s ability to improve its standard of living over time depends almost entirely on its ability to raise its output per worker” (page 11).  The UK government has made increasing the productivity of British workers a priority of its industrial strategy.

But the UK’s poor productivity performance doesn’t appear to be improving. Recent labour market data and GDP 2019 first quarter estimates indicate that output per hour – the main ONS measure of labour productivity – decreased for the third consecutive quarter by 0.2% in Quarter 1 of 2019, compared with the same quarter in the previous year. Business investment declined throughout 2018 as noted in an earlier CBS blog, with fears that it is being damaged by Brexit uncertainty, hence affecting productivity growth.

Britain’s ‘productivity puzzle’ in fact actually contains number of elements.[1] One is a ‘productivity level puzzle’ focused on why UK productivity did not move back to its pre-financial crisis level after a short interval, while the ‘productivity growth puzzle’ focuses on why  the  productivity  growth  trend  appears  to  have  fallen  so much since the financial crisis.

A third element has been highlighted of late in terms of the UK’s ‘regional productivity puzzle’ or why UK interregional productivity differences are so great over such short  distances  when the UK’s relatively institutional  set-up  ought  to  allow  for  technology diffusion across regions.[2]

The UK does have high-performing and high productivity firms in sectors such as pharmaceuticals, automotive sector and the creative industries.  It also has some high-performing cities and regions, notably London.

But the overall picture is one of weakness. Investment – both public and private – is low. The UK’s dysfunctional housing market inhibits labour mobility. There are ongoing weakness in education, training and skills provision for much of the population which will be exacerbated as the economy enters the Fourth Industrial Revolution. There is an over-reliance on the financial sector and there has been weak management with a long tail of lowly performing firms[3], along with lower levels of advanced capital, R&D and skills-training.[4]

These factors are long standing in nature, of course, and cannot explain the post 2008 productivity slowdown.  It might be that aggressive fiscal consolidation, involving sharp cuts in public investment, from 2010, may have led to a permanent fall in the sustainable level of output in the UK economy.[5]

Similarly, Wren-Lewis (2017) suggests that the macroeconomic story is consistent with the notion that both the 2010 budget followed by uncertainty around the EU Referendum from 2015 onwards reduced the appetite for investors to engage in capital deepening (where the capital per worker increases) for almost a decade,[6] with a knock-on effect on productivity.

Economists’ estimates on the long-term direct impact of Brexit on UK productivity – via effects on trade and FDI as trade costs rise and EU market access falls – range from an adverse effect on the level of GDP per worker of 4 to 8%, depending on various modelling assumptions and of course the form of Brexit.[7]  Overall, what this suggests is that Brexit will make relative UK productivity performance worse not better.

Recently, Crafts (2019) has asked whether Brexit might allow the UK more freedom to reform supply-side policy free of constraints imposed by EU membership and by being part of the Single Market.[8]

His response was negative. Like others, he highlights UK policy weaknesses in a range of areas including education and skills, infrastructure, innovation, regulation and taxation. But as noted by others, these are largely ‘home grown’ issues, already under UK policy control.

Brexit itself will not do anything directly to improve the education system, training, or infrastructure, for example. In a broader context, might Brexit provide the opportunity for a policy ‘reset’ moment’ that could enable policy makers to begin to address the underlying issues of Britain’s various productivity puzzles?

That’s not at all clear when policy makers may anyway be trying to minimise the downside effects of Brexit on UK competitiveness. And as Jonathan Portes notes in the Brexit Scorecard, so far, this ‘reset opportunity’ has been missed; “whether that can change will determine the long run success of Brexit.”

Prospects

Competitiveness can of course be defined in a number of ways. In understanding how Brexit might impact on productivity in the UK, the definition used by The World Economic Forum (WEF) is useful here. It defines competitiveness as “the set of institutions, policies and factors that determine the level of productivity of a country”.

Given both the complexity of the UK’s economic relationship with the European Union built up over decades, and the fact that the form of the future trading relationship is not clear, it is of course difficult to forecast how Brexit will affect competitiveness (and hence productivity) in the future.

Of the 112 individual indicators that make up its Global Competitiveness Index, the WEF suggest that 14 could be directly negatively impacted by Brexit, while three (and potentially six) of the 112 indicators have the potential to positively impacted.[9]

In this regard, this measure of the UK’s competitiveness will depend on how successful the UK is in minimising the potential downside on the 14 indicators while maximizing any upside from those that might have a positive impact.

The WEF notes that there aren’t really any precedents but looking at other non-EU nations that have a close trading relationship with the EU suggests that on many of the indicators that are directly influenced by Brexit, the UK currently fares better than non-EU peers such as Switzerland and Norway, such as on: the prevalence of non-tariff barriers; trade tariffs; the prevalence of foreign ownership; and the business impact of rules on Foreign Direct Investment (FDI).

At the same time, aspects of competitiveness where peers like Switzerland and Norway do really well are not directly influenced by EU membership, such as Norway’s good score on the macroeconomic environment (thanks largely to its oil wealth) or Switzerland’s world leading status on innovation (based on a long-standing collaboration between business and academia).

It isn’t likely that the UK would be able to match the latter, for example, without a much greater effort in various policy areas going forward (again requiring a ‘reset’ moment). What this suggests is a clear downside risk for UK competitiveness from Brexit with only limited upside potential, at least in the short term.[10]

So the big question remains as to whether Brexit could offer the opportunity for a ‘reset’ that could enable policymakers to really start to tackle the root causes of the UK’s productivity puzzles. So far, though, Brexit has had the opposite effect, effectively paralysing policy action in a range of areas. As the Brexit Scorecard concluded, perhaps post Brexit this could change, and policymakers could focus on such issues, “but at present it is hard to be optimistic”.

[1] Schneider, P. (2016), “There are Two Productivity Puzzles”, Bank  Underground, https://bankunderground.co.uk/2016/11/17/there-are-two-productivity-puzzles/

[2] https://productivityinsightsnetwork.co.uk/app/uploads/2018/06/P-McCann-Final-synthesis.pdf

[3] Although recent  analyses  suggest  that  the  under-performance of the more productive firms and larger firms may have in fact dominated the UK’s productivity downturn (https://productivityinsightsnetwork.co.uk/app/uploads/2018/06/P-McCann-Final-synthesis.pdf)

[4] https://ukandeu.ac.uk/wp-content/uploads/2019/06/The-Brexit-Scorecard.pdf

[5] Portes (2019) https://ukandeu.ac.uk/wp-content/uploads/2019/03/Article-50-two-years-on.pdf

[6] Wren-Lewis,  S.,  2017,  “Disentangling  the  UK  Productivity  Problem” (https://mainlymacro.blogspot.co.uk/2017/11/disentangling-uk-productivity-problem.html)

[7] Crafts, N. (2019). Persistent Productivity Failure in the UK: Is the EU Really to Blame? National Institute Economic Review, 247(1), R10–R18. https://doi.org/10.1177/002795011924700111

[8] Crafts, N. (2019). Persistent Productivity Failure in the UK: Is the EU Really to Blame? National Institute Economic Review, 247(1), R10–R18. https://doi.org/10.1177/002795011924700111

[9] https://www.weforum.org/agenda/2016/09/what-impact-will-brexit-have-on-the-uk-s-competitiveness/

[10] https://www.weforum.org/agenda/2016/09/what-impact-will-brexit-have-on-the-uk-s-competitiveness/

Facebook Twitter Plusone Linkedin Pinterest Email
Posted in Blogs, Economics, Unite The Union | Leave a comment