British work force, going cheap

Reuters Breakingviews

Britain's business secretary Vince Cable talks to journalists on the production line at the Vauxhall plant in Ellesmere Port, northern England May 17, 2012. General Motors will build the next generation of its Astra compact in Britain, rather than in Germany, after workers at its plant in Ellesmere Port, northwest England, agreed to a new labour deal overnight. (PHIL NOBLE/Reuters)

The U.K. has something to celebrate. It has just got news of an investment by General Motors which will not only keep a car plant near Liverpool open but also add 700 jobs. As a consequence, a GM plant in Bochum, Germany, may unfortunately lose out.

The British work force’s “flexibility” is being touted as key to the Ellesmere Port plant’s success. That flexibility may be something of a euphemism. Rainer Einenkel, the works council chair at GM’s Bochum plant, complained in March about a succession of plans that had meant “the slashing of thousands of jobs, plus wage cuts.”

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Are the British workers right to be flexible? The less than cheerful reality is that they have to be. U.K. unemployment, at 8.3 per cent, is close to a 17-year high and considerably worse than Germany’s 6.8 per cent. And the northwest of England, where the Ellesmere Port site is located, has a worse unemployment rate, 9.3 per cent, than the country as a whole.

That flexibility is evident too in other jobs news. U.K. employment just rose by an impressive 105,000 in the three months to March. But that gain was entirely explained by part-time jobs, which rose by 118,000. British workers prefer full-time work but are prepared to take part-time ones. Half a salary is better than none.

Like the labour force, the British currency is also cheap. A pound used to be worth $2 (U.S.). Now it’s only worth $1.59. And even if it has regained some ground of late against the euro it still remains almost 20 per cent lower than it was before 2008. That’s a big competitiveness gain. Nor does the pound have the euro’s huge uncertainties. If the euro were – heaven forbid – to break up entirely, how strong would the revived deutschmark be?

The U.K. and its workers might be said to be devaluing themselves. But like the not-too-expensive Vauxhall Astras that are going to be produced at Ellesmere Port, it’s a way from A to B, even if not the most luxurious one.

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Companies & investments Mentioned In This Article (1)

Company Price Change Volume
General Motors
37.41 -0.927 % 13,865,052