AbstractThis review examines trends in the economy and industrial relations in 1994 and goes on to consider the implications for unions of the continuing restructuring of organizations in the public and private sectors. The background is one of cyclical improvement in economic performance, with low inflation and strong growth feeding through to higher profit margins. Firms are shown to have enjoyed the benefits of the upturn with little pressure from labour for a greater share of the surplus. Unsurprisingly, employers have not generated much demand for further reform of the industrial relations system. Unions, on the other hand, have remained largely on the defensive, from a combination of job insecurity among their members, organizational constraints and political marginalization. Initiatives from the TUC show evidence of the union movement trying to develop a new set of strategies to break out of the spiral of decline.