Opinion

The Sun's oft-quoted headline 'Crisis? What Crisis?' seized on the remarks of Prime Minister James Callaghan as he returned from a summit in the Caribbean to the dark, cold days of the UK's Winter of Discontent

The Prime Minster had decided against a 1978 election and delayed over the winter, evidently hoping the economy would improve despite disputes with the unions over pay restraint. In the event, intense industrial unrest followed. By 1979 the UK had elected a Conservative government and Margaret Thatcher was Prime Minister.

Perhaps optimism is critical to success in politics. The present Chancellor's economic forecasts certainly look optimistic against the background of mixed signals from the US economy; the threat of war; industrial tension; and costly new employment legislation. So how optimistic can we be about the 'social partnership' between employers and unions that is at the heart of the Government's employment relations ideology? New law is impacting on that partnership. The unions are campaigning for better legal rights while UK employers are facing added employment costs and more benefits for part-time workers, fixed-term employees and, in future, agency workers. Businesses of all sizes are trying to make a profit in tough times while also accommodating added legal rights for workers.

This year will see more requests for flexible working, more equal pay claims, extra discrimination protection and, inevitably, more tribunal cases. The cost of managing HR will go up even in well run organisations, not to mention law firms. It is important to protect workers and to achieve balance between productivity and the reasonable needs of employees. Nonetheless, no one can guarantee the right to work, which is increasingly threatened by the decline of overseas investment in the UK.

The past 20 years of relative stability in industrial relations and economic growth have helped boost inward investment. The relatively unregulated UK has been a good place to do business. However, our share of Europe's inward investment is declining. Technology now makes it possible to move jobs to cheaper and less regulated countries that are well away from Europe. There is increasing migration of white collar jobs to India, China and other countries where costs are lower. The trend is there to see, but we cannot tell the full impact. Consequent reduction of labour costs may well boost economic recovery, but at the price of jobs in the UK and the US, which is also affected by cheap outsourcing to Asia.

Despite this, the Government must implement still more legislation from Europe in the shape of the Information and Consultation Directive, which may be seen by some businesses to be challenging their assumptions as to how they should run their businesses. There is much good in European legislation, but the European social model of employment relations does not appeal to all players in the global market. Our Government will need to listen very carefully as it consults on the new directive. The same applies to any review of the trade union recognition laws. While most major employers actively support employee involvement, much progress in this has been achieved voluntarily. Many businesses have established consultation structures that suit them. The diversity of modern business makes it hopeless to conceive a 'one size fits all' approach to methods of employee consultation. Unions are naturally interested in the part they hope to play in new employment relations structures and many employers have no problem with that. Other employers find compulsory recognition and imposed consultation mechanisms totally unacceptable. Legal developments in the UK do not reassure employers who are reluctant to concede more of their management prerogative.

Employment law has major influence on the style and strategies of management. Changes in relative power between management and unions have long-term effects on business planning and investment. We have to know how far the pendulum is swinging. In the 1980s, there was a transition to less collective bargaining constraints; to increased individualism; to greater organisational flexibility and, for better or worse, the dominance of managerial prerogative in the workplace. A shift of the balance of power away from employers is now in progress, and is already testing employers' commitment to the UK market.