UK will become less attractive for firms if workers’ rights reforms are passed, CBI survey finds

The UK is likely to become a less attractive place to do business in the coming years if Labour’s workers’ rights reforms are implemented in their current form, a new survey has suggested.

Some 62 per cent of respondents to a survey by the Confederation of British Industry (CBI) survey and recruiters Pertemps said they think Britain will become a slightly (26 per cent) or much less (36 per cent) attractive destination to invest or do business in over the next five years.

Nearly four in ten firms said proposed regulations on flexible working were currently a threat to labour market competitiveness, but the figure rose to 58 per cent over the next five years. 

Only a quarter of firms surveyed were confident they could absorb extra costs from the expected employment law shake-up, without it affecting growth, investment, jobs or benefits. 

Some 54 per cent either disagree or strongly disagree that they can afford the higher costs they expect from the workers’ rights package without there being unintended consequences.

Matthew Percival, the CBI’s skills director, said while firms understood the objective of many reforms, a “lack of detail about how they will be achieved has created damaging uncertainty”. 

He added: “Businesses are concerned that achieving these goals in the wrong way risks significant unintended consequences for growth and for workers.

“Companies already struggle to keep up with bottom line pressures, especially SMEs, and that further pressure from employment costs will inhibit their ability to invest, hire and grow.”

He urged ministers to “work collaboratively” with bosses and SMEs as it creates the new legislation to avoid companies being discouraged from expanding or taking on new staff. 

Titled the CBI/Pertemps Employment Trends Survey, the annual report found there was concern among companies over the challenges of kickstarting economic growth, including a lack of detail on Labour’s ‘plan to make work pay’ and the risk of unintended consequences. 

But firms also called on ministers to quickly implement the growth and skills levy, and to tweak the apprenticeship levy, to make it easier to invest in workers’ skills and training.

Of the 152 firms – 110 SMEs and 56 larger companies – who responded to the survey conducted this summer, almost half said they expect the size of their organisation to be larger in 12 months’ time than it is today.  

Carmen Watson, of Pertemps, said the figure was “encouraging” and added: “It’s hugely important that investment in skills training moves from its current slow position to one of a more proactive stance.”

A Department for Business and Trade (DBT) spokesperson said: “The concerns of under 100 businesses in this survey do not reflect those of the hundreds of small, medium and large companies we are actively consulting with as we develop the details of our proposals . 

“The majority of employers support the government’s plans to strengthen employment rights, with a recent survey of bosses showing they think it would be positive for productivity, staff retention and profits.”