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Friday, October 9, 1998 Published at 17:30 GMT 18:30 UK

Business: The Economy

There is trouble ahead...

Labour relations in the UK are undergoing dramatic changes, as European-wide legislation is hitting home, reports the BBC Industry correspondent Stephen Evans.

On building sites up and down the country, workers have been ultra quick to grasp the detail of a rather dull new law. The Working Time Directive came into force only at the beginning of the month but already its provision for breaks and ceilings on the working week have been grabbed by construction workers as one of the most potent weapons in what always was a rough industrial confrontation.

For people working to an employers' deadline, the Directive changes the balance of power. The extension of the Jubilee Line on the London Underground is already way behind schedule and if it doesn't get finished by the Millennium political and business reputations get ruined.

Electricians working on it know the score so they've said in effect to their boss: "Love to help you ... anxious to work the overtime ... but, you know, it's the law ... We'll have to cut the hours to the legal limit."

In a way, the detail of the Directive isn't the point. Rather, it's the lever it gives to unions, letting them say: "We'd love to help you stay within the law ... but it'll cost you".

It begs the question of what else is in the European pipeline. The Industry Secretary, Peter Mandelson, is already looking hard at proposals from Brussels to make companies consult employees.

Currently, the biggest firms have to set up works councils if they operate internationally. The proposal is to extend this to companies with as few as 20 employees and which only operate in one country.

It matters because the proposed directive would give unions a way into many firms which currently ignore them. It would also matter because firms that fell foul of it by not consulting on a wide range of policy would face serious penalties.

Needless to say, the Confederation of British Industry loathes the proposals and the Trades Union Congress loves them. Mr Mandelson will have to decide.

He's given little away so far beyond saying that Europe shouldn't be a back-door route for unions into British firms that don't want them. His view will clearly be listened to in Brussels but, at the end of the day, Britain will not have a veto.

Mr Mandelson also has another tricky matter in his in-tray. The balance of power in workplaces is not just a balance between union and employer, but also between individual employees and employers.

The Fairness at Work White Paper, which he found in the tray when arrived, has one difficult provision which will make it much harder to sack people, namely removing the ceiling on pay-outs to wrongly-sacked employees.

At the moment, it's 12,000 pounds so an employer knows the maximum damage and can make the calculations. If Mr Mandelson accepts this proposal which he inherited, employers will have potentially huge bills (the compensation to a high earner could run to hundreds of thousands of pounds).

The indications are that he won't but nothing is yet decided. He's seen as the voice of business in government. His deputy, Ian McCartney, is seen as a voice for unions in government.

Arguments are yet to be resolved. Their outcome will affect many millions of people in their daily lives.

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