The pattern of UK employment has been significantly transformed over the last two decades, strengthening the services base of the economy but in the process imposing significant adjustment pressures on many groups in the labour force. The manufacturing sector has experienced large scale job losses: of the 7.26 million jobs in the sector in 1979, some 2.8 million, or 40%, had disappeared by 1992. The impact on some regions and groups of workers has been severe unskilled workers especially found it difficult to obtain re-employment, and their relative earnings have declined. During this period unemployment levels increased rapidly, peaking at 3.1 million in 1983 but remaining at over 2 million for much of the subsequent period. These developments have been driven by a number of factors, both national and internationial. Technological advance and institutional change have certainly been major factors. A key concern, addressed in this paper, has also been the role played by the rapid growth of import competition from low wage economies. To the extent that low-wage competition shifts UK consumption from domestically-manufactured to imported goods, jobs in UK manufacturing will be lost. Whilst this should eventually lead to a redeployment and more productive use of UK labour, it generates at least transitional unemployment. Moreover, the displacement effect will have knock-on, multiplier effects on upstream industries that supply intermediate products, and on business services which are used by the import-competing industry (Greenhalgh 1994). Employment in import competing sectors could further be affected as UK firms seek to defend their market position by improving X-efficiency and speeding up technological innovation. The consequent productivity gains, while making jobs more secure in the longer term, might generate additional job losses in the short-term by enabling firms to maintain output with fewer workers. The adjustment costs associated with these changes will depend on the flexibility of labour markets. Of course, adjustment and change are normal features of a modern market economy and there are offsetting general equilibrium effects. But there could still be concern that the scale and speed of rising competition from developing countries imposes excessive short-term adjustment costs on owners of resources in UK manufacturing, or at least that this might provoke a protectionist backlash thatjeopardises progress towards a more open UK economy.