Foreign Labor Trends Report: United Kingdom 2006

December 19, 2006

U.S. Department of Labor
Bureau of International Labor Affairs
December 2006

I. Key Labor Indicators
II. Summary Of Major Developments

III. Description Of The Labor Scene
IV. Labor Law And System
V. Labor Standards And Worker Rights
VI. Social Safety Net
VII. Foreign Investment Potential
VIII. Directory Of Labor Contacts
IX. Key Sources

Key Labor Indicators

United Kingdom 2006




Percent Change


Per capita GDP/GNP, current prices (US$)[1]





Consumer prices, inflation rate (%)





GDP generated in agriculture (%)





-, in industry (%)





-, in services (%)





Population, total (millions)





-, by major ethnic groups (%)













N. Irish

























-, in major urban areas (%)





Population beneath poverty level (%)





Birth rate (per thousand population)





Life expectancy at birth, total (years)





-, Male





-, Female





Adult literacy rate (%)





Labor force, civilian, total (millions)[2]





-, male (millions)





-, female (millions)





Completed primary education (equivalent to 6th grade in US, %)





Employment, civilian, total (millions)





-, in industry (millions)





-, in export processing zones (%)





-, in agriculture (millions)





-, in services (millions)





-, in government (millions)





Unemployment rate (%)





Underemployment rate (%)





Level of unionization of workforce (%)[3]





Work-related deaths (000)[4]





Work-related injuries and illnesses (000)





Days lost from industrial disputes (000)





Minimum hourly wage rate, (BPS)[5]





Avg. hourly earnings by major industry, (BPS)[6]

-, Manufacturing




-, Wholesale & Retail Trade




-, Government




-, Education




-, Health





Avg. Hours worked per week,

in manufacturing





-, in Services





-, in Agriculture




n/a = not available or not applicable
Exchange rate: US$ 1 = 1.85 British pound sterling (BPS); 0.55 (BPS, 2005); 0.5462 (BPS, 2004)

[1] Source for Indicators Nos. 1-14, 25 are The World Factbooks, 2005 and 2006.

[2] Labor Force Survey (2002) is source for Nos. 15-24, 26, 30.

[3] National Statistics Online, UK Snapshot is source for No. 27

[4] Health and Safety Statistics, source for Nos. 28 and 29

[5] Source: HMRC(Her Majesty's Revenue and Customs)

[6] ASHE the Annual Survey of Hours and Earnings (Office of national Statistics) is source for Nos. 32-35.


The United Kingdom has been governed since 1997 by the Labour Party, with party leader Tony Blair serving as Prime Minister. The Conservatives (Tory) and the Liberal Democrats are the major opposition parties. Labour has governed on a broad centrist platform advocating open and competitive markets, increased spending on public services, improvements in education, and fairness in the workplace.

Tony Blair and the Labour Party were reelected to an historic third term in elections in May 2005, although with a substantially reduced Parliamentary majority. This election and the campaign period that preceded it marked a shift in the relationship between organized labor and its political brethren. Blair's move to the political center in the mid-1990's had raised doubts among many labor traditionalists, who remained suspicious even after the government followed through on the pro-worker legislative and regulatory commitments it made in the first two terms. By 2002, the euphoria of the victory and return to power began to fade. Organized labor struggled with the conundrum of criticizing a Labour government on specific policy issues while maintaining its traditional links to the Labour Party. Some of the largest unions began to talk openly about changes to Party funding structures. Two unions, the Fire Brigades' Union (FBU) and the National Union of Rail, Maritime and Transport Workers (RMT), withdrew their direct affiliation with Labour.

In July 2004, the Labour Party and the remaining 16 affiliated unions reached agreement on a framework (called the Warwick Agreement) that outlined the major workforce-related commitments for a third term. In return, the affiliated unions committed to fund and engage in election campaign activities. The agreement included commitments to reform the pension system, introduce additional paid holidays, invest in skills training, and pass laws on corporate manslaughter. Equally significant was the omission from Warwick of long-standing union demands not addressed in Labour's first two terms, e.g. the right to engage in secondary strike activity and compulsory participation in private pension schemes. Since the elections, the Government has reiterated its commitment to the Warwick agenda, though emphasizing that the reforms outlined in the Agreement constitute good public policy, rather than highlighting promises to a union constituency. Unions in turn have become more strident, calling for prompt action on the Warwick agenda and a review of a traditional left-wing package of labor and employment policies.

Blair's smaller Parliamentary majority is made more difficult to manage by a significant cadre of rebellious MPs who have voted against the government on key issues like education reform, school financing reform, and foreign policy. After Blair's announcement in May 2005 that he would stand down as Prime Minister sometime before the next election (expected in 2009), pressure mounted for him to set a specific date for a handover of the party leadership. In September 2006 he indicated he would leave within 12 months. Chancellor Gordon Brown is the presumed successor. However, Blair has seized the initiative and defied skeptics by pushing through his controversial education initiatives with the help of Tory votes, by launching the largest reform of the pension system since World War II, and by going on record in favor of retaining nuclear power as a policy option just weeks before the publication of a major study of energy policy in July 2006.

The Conservative Party elected a new leader, David Cameron, in December 2005. Cameron ran his leadership race on a moderate platform and has begun to woo the middle class swing voters who brought so-called "New Labour" to power in 1997 with a "New Tory" centrist policy package. The party did fairly well in local council elections that took place in May 2006 and polling since shows a small but persistent lead over Labour nationwide.


The UK economy has outperformed the rest of Europe since 1997, averaging 2.8 percent GDP growth annually, and now is in its tenth consecutive year of growth. Labour generally is credited with this prosperity. The Government has stuck with centrist, free market-based policies and private sector-driven solutions, some of which were put in place during the painful reforms of the Thatcher years. It has resisted calls for protectionist trade policies and has promoted high levels of foreign direct investment in the services sector, particularly in financial services, that has helped fuel the boom. The economic outlook remains favorable. In his March 2006 budget report, Chancellor Gordon Brown projected 2.0-2.5 percent growth for 2006-07 and 2.75-3.25 percent in 2007-08. Inflation remains low and is expected to stay at its current target rate of 2.0 percent in the near term. Unemployment has stayed at around 5 percent since 2003 and employment levels are at a record high.

Slower growth may lie ahead, however. A consumer spending boom in the years 2002-04, fed by a surge in housing values and rising consumer debt, now has begun to taper off. Property values soared 176 percent between 1997 and 2006, 10.1 percent in 2004 alone. That rate of growth has more than halved in the past 12 months to 4.5 percent. Consumer confidence was further dented by pessimism about job prospects, higher energy prices, and rising levels of debt.

The Labour government's political commitment to increase spending in the health and education sectors also contributed to the robust growth of the past decade. Since 1997, New Labour spending has created 700,000 new public sector jobs. In the southeast region, the public sector accounts for slightly over one third of the economy; in some parts of the north of England, it represents over three-fifths. However, in his most recent speeches, the Chancellor has warned that growth in public spending is projected to fall from five percent to two percent per year. Government agencies also are beginning to feel the effects of a downsizing of 88,000 public sector positions announced in the 2003 budget cycle and implemented over the past two years, further straining government-union relations.

The UK is not a member of the European Single Currency (the euro). The current Labour Government has said that it favors joining, but only if the British public approves adoption of the euro in a national referendum. The date of this referendum is contingent on a government assessment based on five economic tests -- sustainable convergence, sufficient flexibility, effect on investment, impact on financial services, and effect on employment. Once these tests are passed, the government must then seek Parliamentary approval for a national referendum. Given the current lukewarm support for the euro among the British people, however, a referendum is not likely to occur in the foreseeable future.


The relatively strong performance of the UK economy is reflected in its employment data. As of July 2006, UK employment had reached a record 28.97 million, and the unemployment rate as measured by the International Labor Organization (ILO) was 5.5 percent. Most of the strong growth in jobs occurred in the finance and business services sector, offsetting an ongoing drop in jobs in the manufacturing sector. Since the enlargement of the European Union in May 2004, the UK workforce has been augmented by an influx of workers from the new EU member states in Eastern Europe, with more than 447,000 workers from these countries registering for work between May 2004 and June 2006.

About 26 percent of the British workforce belongs to a union, a low proportion by UK historical standards, but still relatively high. Public-sector workers have a much higher share of union members -- nearly 60 percent -- while the figure for the private sector is much lower at about 17 percent. Union membership has been relatively stable in the past few years, although the trend has been slightly downward over the past decade.

A persistent characteristic of the UK workforce is its relative lack of mobility, geographically and between trades. Successive governments have introduced retraining schemes and grants with some success in creating a more adaptable workforce. The influx of foreign workers has helped to alleviate this problem, as has the growing share of women in the workforce -- currently at about 46 percent of the working population.

The most serious issue facing British employers is a skills gap derived from a high-skill, high-tech economy outpacing the educational system's ability to deliver work-ready graduates. The Government has placed a strong emphasis on improving the British educational system in terms of greater emphasis on science, research and development, and entrepreneurship skills.


Key labor-related functions are organized at the national level under several government departments. The Department for Work and Pensions covers all types of benefits, including pensions and disability payments. It oversees the Job Center program of support for individuals seeking work or training for new work. It also is responsible for enforcement of health and safety rules in the workplace. The Department for Education and Skills handles training and adult education, including support for union learning representatives. The Department for Trade and Industry is responsible for setting and administering workplace policy and regulations, including the working time directive and minimum wage provisions. Decision-making and administration of programs in the UK tend to be highly centralized with both policies and funds flowing out of London to the regions. Each of the Departments is headed by a Secretary of State who is also a Member of Parliament and who is appointed by the Prime Minister. Junior ministers, also MP's, handle sub-Cabinet portfolios and manage relevant legislation in the Parliamentary process.

The Advisory, Conciliation and Arbitration Service (ACAS), founded in 1975, falls under the umbrella of the Department for Trade and Industry. ACAS offers independent advice and dispute resolution/mediation services. ACAS also provides training to employers and employees to solve problems in the workplace. The organization is governed by a council made up of leading figures from businesses, unions, academics, and other non-governmental organizations. The ACAS Council determines the strategic direction, policies, and priorities of ACAS and assures that its statutory duties are carried out effectively. ACAS has 11 regional offices some of which are very active in promoting local discussion of workplace issues through Employment Forums.


The Confederation of British Industry (CBI) is the principal voice for business in the UK. Its officers play an important role as public spokesmen for member companies and also are frequently called upon by the government to comment on legislative proposals or other issues of note. The CBI is not authorized by its affiliated companies to engage in collective bargaining.

Formed in 1965, the CBI represents 240,000 member companies (out of about 1.7 million enterprises in the UK). It is directed by an elected president and council. Operations are conducted by committees charged with specific responsibilities (employment, education, and training) and professionally staffed under the management of a director general and two assistants. The CBI is a member of the European Employers Federation (UNICE) and represents British employers at the ILO. The CBI maintains a presence in Brussels, Washington, and Beijing, as well as offices throughout the United Kingdom.

As of March 31, 2005, there were 85 employer organizations registered with an independent national certifying body. All are engaged in collective bargaining and many represent companies also affiliated to the CBI. As in the case of the trade unions, the number of employers associations has been declining. Comparable statistics showed 106 organizations registered in 1998 and 100 in 2000. Some have phased out activities in response to the decline in Britain's manufacturing sector; others have merged with related organizations. Certain employer associations are active only in Scotland. Other organizations representing various aspects of British business interests other than employment matters include the Institute of Directors and the Association of British Chambers of Commerce.

Major Trade Unions

The Trades Union Congress (TUC) is the largest organization of trade unions in the UK, representing over 90 percent of organized workers in Britain. As of June 2006, the TUC had 64 affiliated unions with 6,452,267 individual members. The decline in the number of affiliates (from 71 in 2003) was due largely to mergers. There are approximately 120 other unions that are not affiliated to the TUC, the largest of which is the 400,000 member Royal College of Nursing. Most of these non-TUC unions, some of which operate only in Scotland, are small organizations representing workers or categories of employees in specific firms.

Britain's four largest trade unions are TUC affiliates and, as membership on the TUC General Council is allocated by size, have proportionately greater representation on the Council. UNISON, the largest public sector workers' union is also the largest trade union with over 1.2 million members. The largest private sector union is Amicus with over 1.1 million members after its October 2004 merger with the bank employees' and the printers' unions. Negotiations are relatively advanced between Amicus and the third-largest union, Transport and General Workers (TGWU), over yet another merger that will create a mega-union of about 2 million members. Most observers believe that the TGWU will be absorbed into Amicus in early 2007.

The TUC is not authorized to engage in collective bargaining, but it is an active participant in dispute resolution. The TUC General Secretary is viewed by employers and the government as a skilled intermediary and he is frequently tapped to help resolve major disputes between unions and employers. Internationally, the TUC is affiliated to the International Confederation of Free Trade Unions (ICFTU), the European Trade Union Confederation (ETUC), the Commonwealth Trade Union Council (CTUC), and the Trade Union Advisory Committee of the OECD (TUAC). It also represents British workers at the meetings of the tripartite International Labor Organization (ILO).

Scotland has its own independent Scottish Trades Union Congress (STUC), whose secretariat is located in Glasgow. Most affiliates are the Scottish branches of TUC unions, but there are a number of specifically Scottish unions. The STUC often takes policy stances that contradict those of the TUC. A Wales TUC, based in Cardiff, is funded by the national organization. In Northern Ireland, the situation is more complex as UK and Irish trade unions are active in both Northern Ireland and the Republic of Ireland. The unions in Northern Ireland are represented by the nonpartisan and largely autonomous Northern Ireland Committee of the Irish Congress of Trade Unions.


The United Kingdom is generally viewed as having a legal system that upholds worker rights. The UK has ratified all eight ILO core Conventions and continues to promote the ILO Declaration on Fundamental and Principle Rights at Work among all member states. On the domestic side, the Labour government has overhauled the labor law since it came to power, in accordance with its election pledges. The Employment Relations Act 1999 (ERA 99), granted workers landmark rights regarding union recognition and the right to union representation. It also expanded existing labor laws to provide greater protection for part-time workers, agency workers, and workers with families. More recently, the government passed an additional series of amendments, the Employment Relations Act 2004 (ERA 04), that further strengthened provisions on statutory union recognition, the dismissal of strikers, and other aspects of the law related to industrial action. Other laws, such as the National Minimum Wage Act 1998 and the Employment Equality Regulations 2003 have completely changed the legal landscape of the United Kingdom.

One of the most significant changes that the Labour government implemented was the introduction of a national minimum wage in 1999. Taking the advice of the Low Pay Commission, an independent body it had set up in 1997, Labour introduced a �3.60 ($6.65) adult minimum wage, set to rise in October each year. The current minimum wage is �5.35 ($9.90) for adults (those 22 and over) and �4.45 ($8.25) for young people (18-21). Younger workers, those aged 16 and 17, have a lower minimum wage of �3.30 ($6.10).

The length of the work week in the United Kingdom is longer than most other European countries but still short compared to the United States. In general, workers may not be forced to work more than 48 hours a week, referenced over 4-6 month intervals. These regulations do not apply to senior managers or those with flexible work schedules, but they do apply to some professional workers, including junior doctors. While workers may opt out of the limit, they may also opt back in at any time with at most 3 months notice. All workers also have the right to at least four weeks' paid holiday a year, which must be taken in the year in which they accrue. Workers also have the right to paid time off for the performance of duties relating to public or trade union office.

The 1974 Health and Safety at Work Act stipulates that the health and safety of employees are not to be placed at risk, and in practice the act is updated regularly. The Health and Safety Executive effectively enforces regulations on these matters and may initiate criminal proceedings in appropriate cases. Workers' representatives actively monitor enforcement of the act. Workers may remove themselves from dangerous work conditions without jeopardy to their continued employment.

The ERA 99 introduced several important reforms to the laws governing workers' rights to unionize and engage in industrial action. The law also prohibits the compilation of lists of union members and labor activists for use by employers and employment agencies and ensures the secrecy of union membership rolls. The process of balloting for a strike has also become more union-friendly, with unions now being permitted to aggregate ballots across separate workplaces. Additionally, workers are protected by law against dismissal or other retaliation for campaigning or voting for or against recognition. Workers now have absolute protection from dismissal for the first 12 weeks of a legal strike or "trade dispute," with the possibility of extension if the employer is found not to be negotiating in good faith. The law defines a trade dispute in great detail; in summary, a strike must be confined to workers and their own employers; secondary boycotts are illegal. The dispute must be wholly or mostly about employment-related matters (e.g., pay and conditions), workers must be properly and secretly balloted no more than eight weeks prior to the initiation of industrial action (with notice to the employer), and mass picketing is prohibited.

Union recognition is also governed by the ERAs. Unions can file a request for recognition -- identifying the proposed bargaining unit - first to the ACAS, then to the Central Arbitration Committee (CAC), a tripartite group that includes representatives from government, business and labor. The act covers employers with more than 20 workers and encompasses an estimated two-thirds of all workplaces. Once the CAC determines the appropriate bargaining unit, it assesses whether a union is likely to have majority support. If union members already make up a majority of the bargaining unit, the CAC may issue a declaration that the union is recognized for collective bargaining without a ballot. In those instances where the CAC orders a ballot (typically, when the majority of bargaining unit employees are not already union members), the employer must cooperate by providing a list of names and giving the union access to the workplace to campaign. Unions win recognition when a majority of those voting agree, including at least 40 percent of those in the bargaining unit. Although the law encourages voluntary agreements between employers and unions, the CAC may, if necessary, impose a legally binding procedure for bargaining about pay, hours, and holidays. Free association is guaranteed by law and union members are protected against "being subject to any detriment" due to union activity or membership. There is no restriction on possible damages. This right extends to contract and part-time workers. Unions have the power to expel members whose political behavior they deem incompatible with union membership (e.g. members who engage in racist activity).

British law prohibits discrimination in employment on the grounds of sex, race or nationality, disability, sexual orientation, religion or belief, or transsexuality. With regards to sex, race or national origin, workers may not be treated differently on any of those bases, with limited exceptions relating to pregnancy and maternity. Discrimination on the bases of sexual orientation (including homosexuality, heterosexuality and bisexuality) and religious belief are governed based on the perception of the victim. This means that an employee who is discriminated against because he is thought to be gay, for instance, may bring an action against his employer even if he is actually heterosexual or bisexual. There is a narrow exception to this law for religious organizations, which is defined ambiguously but thought to include religious ministers but not employees of religious schools. Transsexual people are protected from direct discrimination in the workplace and post-operative transsexual people retain all the rights accorded to their new sex. Finally, the EU Employment Framework directive requires member states to outlaw age discrimination and was implemented in the United Kingdom in 2006.

The United Kingdom prohibits forced or compulsory labor as well as the employment of children under 16 in industrial enterprise, except as part of an educational course.

All rights available to workers in the United Kingdom are available to citizens and non-citizens on an equal basis, both by law and in practice.

Industrial Relations

The British trade unions retain significant leverage in the British political system. Over 25 percent of the British workforce belongs to a union (vs. 12 percent in the U.S.) Unions founded and continue to be the principal financers of the Labour party. They have a third of the votes in the Labour Party decision-making body and at the annual party conference. Although huge general strikes are things of the past, unions can still mobilize the UK's public sector employees on employment issues and, more importantly, they bring out the vote at election time. With Labour's election in 1997, unions once again became full partners with business in formulating and debating policy. Mechanisms include formal consultations with the TUC and informal relationships between government officials and union leaders. PM Blair established a union liaison position in his office at #10 Downing Street to promote active dialogue. Working-level TUC officials have regular contact with working level ministry employees.

The TUC launched a major partnership initiative in January 2000 to encourage union-management cooperation. Most of the TUC's private-sector affiliates came on board. Under the initiative, unions and management typically negotiated so-called "collective agreements," less formal than collective bargaining contracts, but legally enforceable. Currently, about 35% of the British workforce is covered by collective agreements.

In 2002, Amicus, the largest private sector union, held internal elections for General Secretary in which a close ally of PM Blair was defeated by an avowed left-wing candidate. At the same time, the union underwent major restructuring as part of its formation out of a merger between the former engineering and electrical workers union (AEEU) and a white-collar union, MSF. The new Amicus General Secretary initially chose to focus almost exclusively on internal issues, delegating to his deputies the dialogue with the government. Shortly thereafter, two of the other three biggest unions had a change in leadership, in each case lurching further to the left. These two new General Secretaries and the Amicus head -- the so-called "awkward squad" -- began to speak out more forcefully in 2003 and 2004, using the media to pressure the government to adopt a more union-friendly policy agenda. Despite general acknowledgement that the Blair government had fulfilled many of its early promises to organized labor, some union leaders had hoped that the return to power would bring a more orthodox approach on issues like pension contributions and secondary strike action. Furthermore, key elements of Labour's centrist platform were viewed as attacks on basic public services. Disputes over public-private partnerships in the health service and education reforms giving teachers' aides a more important role in classrooms both resulted in short-term strikes by public services sector unions. At the same time, a growing division within the labor movement itself over the direction of British foreign policy further exacerbated tensions between the government and the unions.

The TUC has retained its status as chief interlocutor and the voice of labor to the government despite these tectonic shifts in the unions themselves. TUC experts continue regular consultations at all levels of government and the TUC General Secretary is regularly called upon to mediate disputes. However, it is unclear how the emergence of a mega-union may affect the TUC's role in the long term. If a single union speaks for more than a third of all organized labor, the government may chose to change its consultation practices. Small and medium-sized unions already view with alarm the possibility that they will lose their access and influence in and through the TUC. Some of the medium-sized unions already have begun to look at forming informal alliances and sectoral groupings to strengthen their voices on specific issues. Unions also recognize the need to develop contacts with the modern Conservative Party and they view the TUC as having a key role in maintaining a labor voice in government regardless of the political stripes of the governing party.

Much of the employment legislation currently affecting the UK labor market originates from the European Commission in Brussels. EU regulations affect working patterns, wage structures, and employee protection rights. Government, business, and labor all participate in formal and informal organizations in Brussels that influence the formulation of EU directives and how they are implemented, although there appears to be less enthusiasm for these EU fora over the past decade.


The Right of Association

The law provides for the right of workers, except those in the armed forces, public sector security services, and police forces to form and join unions.

The Right to Organize and Bargain Collectively

The law allows unions to conduct their activities without interference, and the government protects this right in practice. Collective bargaining is protected in law and is freely practiced. Workers freely exercise the right to strike.

There are no export processing zones.

Prohibition of Forced or Compulsory Labor

While the Government prohibits forced or compulsory labor, including by children, there are reports that such practices exist.

Prohibition of Child Labor and Minimum Age for Employment

The Government effectively implements laws and policies to protect children from exploitation in the workplace.

The law prohibits employment in any capacity of children under age 13. Those under age 16 are not permitted to work in an industrial enterprise, including transportation or street trading; their total work hours are strictly limited and may not interfere with school attendance. They may work as part of an educational course. Independent NGOs claimed that up to two million school-age children were involved in part time employment. A child aged 13 to 16 must apply for a work permit from a local authority and the local authority's education and welfare services have primary responsibility for oversight and enforcement. Authorities effectively enforce these laws. The Central Government's Departments of Health; Trade and Industry; and Education and Skills have regulatory responsibility.

There are reports that children are trafficked into the country and forced to work as domestic servants, beggars, pickpockets, drug couriers, or in sweatshops and restaurants.

Acceptable Conditions of Work

The national minimum wage, which ranged from $6.10 to $9.90 (3.30 BPS to 5.35 BPS) depending on the age of the employee, does not provide a decent standard of living for a worker and family; however, other government benefits fill the gap, including free universal access to the National Health Service. The Government aggressively monitored employer efforts to bring pay practices into compliance with minimum wage law. Unions and NGOs were also actively involved in ensuring employee's awareness of their rights.

The law limits the workweek to 48 hours averaged over a 17 to 26-week period; however, the regulations do not apply to senior managers and others who can exercise control over their own hours of work. The law provides for one day's rest per week, 11 hours daily rest, and a 20-minute in-work rest break where the working day exceeds 6 hours. The law also mandates a minimum of four weeks paid annual leave, including eight national bank holidays. However, the average worker nationwide receives five weeks of paid annual leave plus eight bank holidays as part of collective agreements. An individual employee may agree through a contract to work overtime for premium pay. The law does not prohibit compulsory overtime, but overtime is limited by the 48-hour week restriction.

The law stipulates that the health and safety of employees not be placed at risk, and it was effectively enforced by the Health and Safety Executive (an arm of the Department of Work and Pensions), which could initiate criminal proceedings in appropriate cases. Workers' representatives also actively monitored enforcement of the law. Workers may legally remove themselves from dangerous work conditions without jeopardy to their continued employment.


The UK has an extensive set of government services that provide a social safety net for individuals seeking work, for retirees, and for those unable to work. Some benefits and credits are based on payment of National Insurance (NI) contributions or level of income. Others depend on length of time in employment and level of earnings or on length of residence in the UK. Still others are available strictly on the basis of need. Employees pay NI contributions if they earn more than a lower earnings limit (LEL) set by the government; as of April 2006, the LEL was 84BPS per week, up from 82BPS per week the previous fiscal year. Individuals begin paying NI contributions on income over 97BPS per week and, for earnings between 84BPS and 97BPS per week, they are credited with contributions.

A significant legal change occurred in December 2005 with the implementation of the Civil Partnership Act. Under the terms of the new law, claimants are no longer treated as individuals if they are civil partners or live with someone even if not civil partners. This change affects all means-tested benefits like income support, pension credits, housing benefits, council tax benefits, and income-based jobseeker's allowances, which all now must be claimed as couples with income and resources assessed jointly.

One criticism frequently leveled at the British government is that the benefits structure is overly complicated and that beneficiaries do not understand what benefits they are entitled to receive or don't know how to go about claiming benefits. For example, one of the key recommendations by an independent commission formed to study pension issues was that the government should create a simpler, more transparent system of benefits. The Department for Work and Pensions published statistics in February 2006 that showed that between 4.2BPS billion and 7.3BPS billion in key benefits of all types had been left unclaimed in 2004-05, 1BPS billion higher than in the previous year's estimates.

Job Training and Employment Assistance

There are a range of benefits available to people with low incomes, depending on whether they are working -- part time or full time -- or out of work and looking for a job. The most significant are Working Tax Credits, Income Support, and Jobseeker's Allowance. Working Tax Credits provide support to low-income workers without children, disabled workers, and couples or single parents who are working. It also includes a stipend to help defray childcare costs. Income Support is a means-tested benefit available to those with low incomes. It does not depend on NI contributions. Among the individuals eligible for Income Support are lone parents, the disabled, and those caring for a disabled person.

Jobseeker's Allowance (JSA) is the principal benefit available to those who are unemployed or working only part time and seeking work. JSA has both contribution-based benefits and income-based benefits. The former is payable for a maximum period of six months to those who satisfy certain NI contributions criteria. The latter is payable to those who do not qualify for contribution-based JSA or whose eligibility has expired; these payments are dependent on the claimant's income and savings. All JSA recipients must be actively seeking employment, must be under the state pension age, and must enter into a jobseeker's contract. While there are some exceptions for part-time study, generally this benefit is not available to students.

In 1998, the new Labour government launched an employment assistance program it called the "New Deal." The program provides intensive one-on-one counseling and active job-seeking support for young people, lone parents, and disabled people. The Government delivers these services through its nationwide network of Job Centres, many of which are now upgraded to Job Centre Plus with additional computer-based job search tools. In addition to distributing benefits and supporting job seekers, the Job Centres network with employers in order to identify their needs and provide targeted training to potential employees.

A wide range of benefits is available to those who are sick, injured at work, or have a disability that prevents work. These benefits include sick pay, incapacity benefits, industrial injuries disablement allowances, and various living and career's allowances. Incapacity benefits are paid to qualifying individuals who are incapable of work, either in their own occupation (defined as a job in which they had worked for a given period of time) or generally and who are not entitled to statutory sick pay. After 18 weeks, claimants are required to undergo an assessment of personal capacity by the Department for Work and Pensions (DWP) Medical Service. There are appeal procedures for those assessed as "fit to work" who wish to file a counterclaim. Incapacity benefits are contingent upon NI contributions. In most cases, savings and other income are ignored when calculating the benefit. According to DWP figures, around 120,000 people move each year from statutory sick pay to incapacity benefits and roughly 2.7 million workers or 9 percent of the labor force currently receive incapacity benefits. Around 45 percent of that total have received benefits for five years or more. The Government would like to tighten up the rules governing incapacity benefits as there is a widespread belief that many of the recipients, while incapable of engaging in their previous profession (frequently manufacturing), would be able to work in other jobs with appropriate retraining. The Government has announced changes that will be implemented in 2008 to introduce two levels of benefits -- one for people who, with rehabilitation, would be expected to return to work and another higher rate for those suffering more serious conditions. It also plans to further expand opportunities for workers to retrain to aid their return to the workplace.

Workers who have suffered an injury on the job or who have contracted an industrial disease may collect Industrial Injuries Disablement Benefits (IIDB). IIDB is available either temporarily or permanently for major and minor injuries. The level of benefit depends on the extent of the disablement and is available on top of other NI benefits. Again, there is an appeals process in cases where claims are denied.

One of the major planks in the Labour government's campaign platform has been to address the "work-life balance." There are now more rights to paid time off for expectant mothers, fathers, and, as of April 2003, parents adopting children. Anyone responsible for at least one child under 16 or a young person between 16 and 19 who is in full-time non-advanced education, can qualify for a child tax credit. Nine out of 10 parents are eligible for the child tax credit. All working mothers are entitled to six months of ordinary maternity leave, with the option to extend to one year, during which time they receive all non-wage contractual benefits. They also receive six weeks' pay at 90 percent of average earnings and 20 weeks' at a flat rate of 106BPS. Paternity leave is available for up to two weeks at the same flat rate.

Pensions and Retirement

The present British system combines features of the U.S. social security and welfare systems. The Government pays a basic state pension to all individuals who meet minimum age and NI contributions requirements. In 2006, the basic state pension for a retiree with a full contributions record was 84.25BPS per week. Male pensioners must be 65 years of age and have 44 years of NI contributions; female pensioners born before April 6, 1950 must be 60 years of age and have 39 years of contributions. Starting in 2010, the female retirement age will begin to rise and women born after March 5, 1955 will need to be 65 years of age and have 44 years of contributions. Pensioners are credited with contributions during periods when they receive incapacity benefits, jobseeker's allowance, care giver's allowance or severe disablement allowance. There are special benefits available to all those over the age of 80 who have lived in the UK a total of 10 years after the age of 60, even if they have not made NI contributions. The Winter Fuel Payment of 200BPS annually is available to anyone aged 60 or over who is normally resident in the UK.

The Government also pays an additional means-tested pension to those retirees without sufficient income to put them over the officially established poverty line, currently 109BPS per week. For each 1BPS of additional income, the second pension is reduced by 40 pence. This system of means testing has acted as a disincentive to saving for many workers. Also, the poverty line is set through a mechanism linked to earnings, while the basic state pension has been linked to prices since the 1980s. If current trends in earnings and prices continue, the present pensions system would lead to a gradual increase of the gap between the basic state pension and the poverty line, subjecting more and more of the payment to means testing.

Many individuals also participate in company-sponsored private pension plans. As in other western economies, there has been a move among private companies away from defined benefits plans to defined contributions plans that offer no guaranteed pay-out. In addition, pension plans offered by private companies in the UK typically operate under an "opt-in" system whereby workers must specifically declare their desire to participate in the private plan. Government statistics showed that almost 60 percent of private sector workers did not contribute to a non-state pension plan in 2005, up from just over 40 percent in 2003. The latest Employer's Pension Provision survey indicates that the percentage of employers making pension provision for their employees declined from 52 percent in 2003 to 44 percent in 2005.

In 2003, the British government appointed a special committee chaired by Lord Adair Turner, Vice Chairman of Merrill Lynch Europe and former head of the CBI, to undertake a comprehensive study of pension benefits in the UK. In May 2006, the Government published a White Paper -- the precursor to draft legislation -- which adopted virtually all of the reforms recommended by the Turner Commission. The White Paper proposes sweeping changes to the British pension system, both public and private. The changes include an increase in the retirement age for both men and women to 68 by 2050, more generous state pensions with indexing linked to earnings rather than prices, and creation of a voluntary national savings plan, based on employee/employer contributions that would require individuals to "opt-out" if they did not wish to participate. The number of years required to pay into the system in order to receive benefits will drop to 30 to make it easier for individuals to leave the workforce to care for children or other relatives.

The first implementing legislation was introduced in September 2006.


The UK is the most favored inward investment location in Europe, attracting about a quarter of all direct investment in the EU. About 40 percent of U.S., Japanese, and Asian investment into the EU goes to the UK, which is the home to more leading global corporations than any other EU nation. The U.S. and the UK are the largest foreign investors in each other's countries. The stock of U.S. foreign direct investment in the UK totaled $324 billion at year end 2005. The stock of UK (including UK possessions) foreign direct investment in the U.S. totaled $310 billion at year end 2005.

During the 2004-05 UK financial year (April 2004-March 2005), the UK attracted 1,066 investment and expansion projects by foreign companies, creating more than 39,500 jobs, according to the Department of Trade and Industry. Of the 39 countries with new investments in the UK last year, U.S. investors accounted for the largest share with 464 projects and 17,730 new jobs. The services sector attracted the most new investment with more than 42 percent of the projects, followed by the manufacturing sector with 25 percent and the information technology/software sector with 23 percent.

With a few exceptions, the UK does not discriminate between nationals and foreign individuals in the formation and operation of private companies. U.S. companies establishing British subsidiaries generally encounter no special nationality requirements on directors or shareholders, although at least one director of any company registered in the UK must be ordinarily resident in the UK. Once established in the UK, foreign-owned companies are treated no differently from UK firms. Within the EU, the British Government is a strong defender of the rights of any British registered company, irrespective of its nationality of ownership. Local and foreign-owned companies are taxed alike.

U.S. companies have found that establishing a base in the UK is an effective means of accessing the European Single Market, and the abolition of most intra-European trade barriers enables UK-based firms to operate with relative freedom throughout the EU. Some 5,700 U.S. companies have operations in the UK, including all of the top 100. The UK hosts more than half of the European corporate headquarters of American-owned firms.

Market entry for U.S. firms is greatly facilitated by a common language, legal heritage, and similar business institutions and practices. Long-term political, economic, and regulatory stability, coupled with relatively low rates of taxation and inflation make the UK particularly attractive to all foreign investors.

The U.S. remained by far the most popular destination for new UK outward direct investment in 2004 (the last year for which figures are available), continuing the strong investment partnership between the two countries. The UK is the leading investor in the U.S. in terms of stock of FDI. Other EU member states and Canada attracted a large proportion of the remaining outward UK FDI, although China is growing as a destination for UK investment.


Department for Education and Skills
Sanctuary Buildings
Great Smith Street
London SW1P 3BT
Tel: 44 870 001 2345
Public Enquiries: 44 870 000 2288
Fax: 44 192 879 4248

Secretary of State: Rt. Hon. Alan Johnson MP
Parliamentary Private Secretary: Laura Moffatt MP
Tel: 44 207 219 3619

Minister of State for Children, Young People
and Families: Rt. Hon. Beverly Hughes MP
Parliamentary Private Secretary: Christine Russell MP
Tel: 44 207 219 2459
Fax: 44 207 219 0943

Minister of State for Schools and 14-19 Learners: Jim Knight MP
Parliamentary Private Secretary: Shahid Malik MP
Tel: 44 207 219 4727

Minister of State for Lifelong Learning, Further and
Higher Education: Bill Rammell MP
Parliamentary Private Secretary: Ian Lucas MP
Tel: 44 207 219 8346
Fax: 44 207 219 1948

Parliamentary Under-Secretary of State for Children,
Young People and Families: Parmjit Dhanda MP
Private Secretary: Nicola Sams
Tel: 44 207 925 5177
Fax: 44 207 925 6994

Parliamentary Under-Secretary of State for Skills: Phil Hope MP
Private Secretary: Jonathan Duff
Tel: 44 207 925 5870
Fax: 44 207 925 5151

Parliamentary Under-Secretary of State for Schools: Lord Adonis
Private Secretary: Dunstan Hadley
Tel: 44 207 925 6388
Fax: 44 207 925 6688

Permanent Secretary: David Bell
Tel: 44 207 925 6937
Fax: 44 207 925 6924

Department for Work and Pensions
Richmond House
79 Whitehall
London SW1A 2NS
Tel: 44 207 238 0800
Fax: 44 207 712 2386

Secretary of State for Work and Pensions: Rt. Hon. John Hutton MP
Parliamentary Private Secretary: David Wright MP
Tel: 44 207 219 8331

Minister of State for Employment and Welfare Reform: Jim Murphy MP
Parliamentary Private Secretary: Barbara Keeley MP
Tel: 44 207 219 8025

Minister of State for Pensions Reform: James Purnell MP
Parliamentary Private Secretary: Gordon Banks MP
Tel: 44 207 219 8275

Parliamentary Under-Secretary of State: Lord Hunt of King Heath OBE
Private Secretary: Sarah Kelly
Tel: 44 207 238 0678
Fax: 44 207 238 0682

Parliamentary Under-Secretary of State (Minister for Disabled People): Anne McGuire MP
Private Secretary: Laura Timms
Tel: 44 207 238 0684
Fax: 44 207 238 0687

Parliamentary Under-Secretary of State: James Plaskitt MP
Private Secretary: Robin Gordon-Farleigh
Tel: 44 207 238 0690
Fax: 44 207 238 0845

Parliamentary Clerk: James Rowe
Tel: 44 207 238 0715
Fax: 44 207 238 0829

Advisory Conciliation and Arbitration Service (ACAS)
Brandon House,
180 Borough High Street,
London, SE1 1LW
Tel: 44 207 210 3613

Chairman: Rita Donaghy CBE
Private Secretary: Lynne Bullard
Tel: 44 207 210 3921
Fax: 44 207 210 3663

Health and Safety Executive and Commission
Roase Court
2 Southwark Bridge
London SE1 9HF
Tel: 44 845 345 0055 (Infoline)

Chairman: Bill Callaghan
Private Secretary: Helen Lansdown
Tel: 44 207 717 6612
Fax: 44 207 717 6616

The Trades Union Congress (TUC)
Congress House
Great Russell Street
London WC1B 3LS
Tel: 44 207 636 4030
Fax: 44 207 636 0632

President: Alison Shepherd
General Secretary: Brendan Barber
Private Secretary: Lynne Bullard
Tel: 44 207 467 1232

Deputy General Secretary: Frances O'Grady
Private Secretary: Elaine Newman
Tel: 44 207 467 1263

Assistant General Secretary: Kay Carberry
Private Secretary: Ninette Moser
Tel: 44 207 467 1267
Fax: 44 207 467 1277

Economic and Social Affairs: Ian Brinkley
Tel: 44 207 467 1205
Private Secretary: Cathy Linden
Tel: 44 207 467 1204
Fax: 44 207 467 1317

Equal Rights: Sarah Veale
Tel: 44 207 467 1326
Private Secretary: Amanda Ling
Tel: 44 207 467 1260
Fax: 44 207 467 1333

International Affairs: Owen Tudor
Tel: 44 207 467 1325
Private Secretary: Pat Brown
Tel: 44 207 467 1226
Fax: 44 207 467 1211

Management Services: Mike Jones
Tel: 44 207 467 1274
Private Secretary: Jackie Blay
Tel: 44 207 467 1289
Fax: 44 207 467 1353

Organizational Services: Tom Wilson
Tel: 44 207 467 1383
Private Secretary: Debbie Cleary
Tel: 44 207 467 1290
Fax: 44 207 467 1265


Labour Research Department. Law at Work 2005. LRD Publications, London, May 2005

Labour Research Department. The Employment Relations Act 1999 - a Guide for Trade Unionists. LRD Publications, London, November 1999

National Statistics Online, Labour Force Survey 2006 <>

Bureau of Economic Analysis, US Dept of Commerce