How could the re-nationalisation of private sector industry affect jobs?

Employment | 5th June 2018

With the recent news that East Coast railway services have been re-nationalised, there has also been a resurgence of interest in the nationalisation of the entire rail network. With the Labour Party pledging that they’ll re-nationalise the railways if they’re voted into power, and 70% of UK citizens saying that they support re-nationalisation, we thought it would be a good time to examine the potential impact of re-nationalisation on jobs.

Nationalisation as a last resort

In the past, nationalisation has often been used as a weapon of last resort. Faced by the prospect of a business or industry being forced to close due to unprofitability or other market forces, governments have often stepped in to prevent large scale jobs losses. For instance, in 2013, the Scottish government nationalised Prestwick Airport in an attempt to safeguard jobs.

In this context, nationalisation has a strong, but localised, effect on jobs and employment. However, in order that jobs continue to be protected, nationalisation does need to result in a reversal of fortunes for the business in question. In the modern economic climate, no government is likely to protect a weak business indefinitely, particularly if it fails to demonstrate improved financial performance.

Nationalisation as a response to unemployment

Historically, nationalisation has also been used as a means of combatting high unemployment rates. In the post-war reconstruction period, the Labour Government pursued a policy of ‘full employment’ and attempted to achieve this by nationalising a number of key industries.

Though the policy successfully lowered the high unemployment rate at the time, detractors would argue that many of the nationalised industries were poorly run, contributed to the UK’s economic stagnation in the 1970s, and eventually had to be privatised in the 1980s. Though debate still rages over the wider economic impact of nationalisation in this period – as well as the extent to which it affected employment levels in the long term – there can be no doubt that it successfully tackled the high unemployment rates of the time.

Nationalisation in the current context

The difficulty with predicting how nationalisation will affect jobs in the current context, is that nationalisation is not being considered for either of the two reasons mentioned above. Instead, nationalisation is a response to poor performance by private companies, and the public’s perception of private rail companies as milking the system for profit while delivering sub-standard services.

In the modern economy, predicting how nationalisation will affect job numbers is particularly challenging. To a large extent, it depends on how successful the nationalisation is, and how the government conceives of its implementation. It is true that nationalisation will affect employment in those services that private companies are likely to terminate due to unprofitability. For instance, a nationalised railway service is more likely to staff quiet, rural services and stations, whereas private owners have more of an impetus to cut jobs in these areas.

Finally, it’s worth noting that long-term nationalisation is currently only being pursued by those parties in opposition, most notably Labour. While nationalisation has occurred under Conservative governments, it has nearly always been a temporary arrangement.

Labour and the unions

If Labour were to re-nationalise the industries mentioned in their most recent manifesto, they would be doing so with the support of most of the country’s unions. However, the way they nationalise these industries would also require the backing of relevant unions. Consequently, any re-nationalisation process would need to avoid job losses.

However, this doesn’t necessarily mean that new jobs would be created either. The most likely outcome is that employment opportunities in nationalised industries would remain stable, while working conditions and rights improve, and unions in those areas where private owners are trying to axe jobs (such as the Southern Rail franchise) would be supported by the government.

The effect of re-nationalisation on a business or industry is completely contextual. While some outcomes are more likely than other, the impact nationalisation has will vary from industry to industry, and business to business.

This is not legal advice; it is intended to provide information of general interest about current legal issues.

Jane Crosby

Associate, Dispute Resolution

Jane specialises in commercial litigation and employment law acting for both employers and employees in both contentious and non-contentious matters. ...