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To the best of my knowledge it's legal so long as the employer makes staff aware of his/her intention to review e-mails.
Employers have a duty of care to all their employees and there have been instances where e-mails have caused offence to some employees (e.g. rumour-mongering, pornographic images, etc,). The provisions of the Data Protection Act, through which people have a right to view information being held about them, may also be a factor. A prudent employer will seek to minimise exposure to accusations his/her duty in this regard has been neglected.
It's also worth noting that most e-mails contain a footer which shows the source of the e-mail and it's reasonable for an employer to ensure that the company is not associated with inappropriate messages.