Europe’s ongoing public and private sector strikes for pay are projected to cause only a “minor and temporary” setback to real GDP growth, according to Swiss Re Institute.
The tight labour markets are aiding worker and union bargaining power, leading to nominal wage growth, while the overall gross property and casualty insurance exposure to strikes is deemed moderate.
“Ongoing strikes in Europe reaffirm our baseline view of stagnation across the region,” the report noted. “Yet, we expect the strike action in its current scope to not meaningfully alter our full-year GDP forecasts, as they typically have only a temporary effect on growth.”
Policy outcomes, such as public-sector pay deals, may have a more significant impact on public finances. An adverse scenario would be if strikes become more widespread and last longer than expected, leading to sustained social unrest that could shake economic confidence.
The cost of strikes in the UK and Germany is estimated to be small, with only a minor impact on GDP growth.
“We estimate high wage growth in Europe in 2023, with the UK and Germany projected at around 6% on average, at least, followed by France at 5.5%. Yet, we maintain our view that a 1970s-style wage-price spiral is unlikely.”
The strikes are expected to have a muted impact on P&C insurance, with direct effects on traditional and business interruption insurance being moderate and limited to actual physical losses or damages and resulting disruption to operations.
“Overall, these strikes are making economic, political, legal and social landscapes even less predictable than before, and this might prolong the hard market in commercial lines of business, amongst others.”
