Rayner's workers' rights bill will damage growth, warn bosses

Yahoo

06-06-2025

Angela Rayner's radical shake-up of workers' rights will hurt economic growth, bosses have warned, as companies prepare to slash hiring and curb investment.
More than seven in 10 business leaders believe the Government's Employment Rights Bill will have a negative impact on the country's economy, according to a survey carried out by the Institute of Directors (IoD).
Nearly half said they would be less likely to hire new staff as a result of the reforms to workers' rights.
The warning will raise alarm bells for the Chancellor who has said that restoring economic growth is her priority. It threatens to deepen tensions between Ms Reeves and the Deputy Prime Minister, who is overseeing the workers' rights reforms.
The pair have already clashed over the direction of economic policy, with a leaked memo recently revealing Ms Rayner was pressing the Chancellor to pursue tax rises instead of spending cuts.
Under the workers' rights reforms, employees will be able to claim sick pay from the first day of their illness, instead of the fourth.
The Bill will also extend the powers of unions in the workplace, making it easier for trade groups to organise strikes by weakening the thresholds currently needed to trigger a walkout.
Sir Keir Starmer previously made the shake-up, dubbed Labour's 'new deal for working people', as a core part of his manifesto in the lead-up to his victory in the general election.
However, it has sparked concern from business chiefs. The survey by the IoD found that more than half (52pc) of company bosses said they would be more likely to invest in automation as a result of the Bill.
A quarter of business leaders polled said the Bill made it likely that they would make redundancies in a further blow to the labour market.
The IoD, the so-called 'bosses' union', represents 20,000 business leaders across the country, ranging from entrepreneurial small ventures to major corporations.
Already, many of those businesses have reported a slowdown in hiring since the Chancellor announced an increase in employers' National Insurance contributions and the minimum wage in the autumn Budget.
The rise in labour costs has caused many businesses to cut jobs or scrap hiring plans.
Alex Hall-Chen, a principal policy adviser for employment at the IoD, said: 'Government has yet to show that it is listening to the concerns of business about the potential unintended consequences of the Bill as it is currently drafted.
'If there is a silver lining, it is that more employers will invest in automation and other measures which may improve the UK's stagnating productivity levels.'
The IoD has called on the Government to make targeted changes to the Bill, which it believes would soften the negative impact of the reforms on hiring.
One of its proposed changes includes keeping the existing thresholds for statutory recognition of trade unions.
Andrew Griffith, the shadow business secretary, said: 'If Labour ministers had worked in business they would know their choices mean that British workers will lose their jobs to robots and foreign workers.
'Whilst all Labour governments leave unemployment higher than they found it, this time they are actually passing laws to guarantee it.'
The warning over the worker rights reforms comes after MPs warned that Britain's high energy bills and poorly coordinated efforts to fund business growth was hitting growth and prosperity.
MPs on the business and trade committee said: 'The UK's high electricity prices are damaging the ability of UK businesses to compete, attract investment and decarbonise.'
It pointed to evidence from Nissan that the company's Sunderland plant has higher energy bills than any of its other car factories in the world.
Liam Byrne, chairman of the committee, said: 'The evidence we've heard from the nation's leading industrialists, scientists, economists and trade unionists is that this moment of history will be lost if the Chancellor's new investment is not matched by a re-making of the British state for a new economic era.'
The MPs also called on the Chancellor to act to stop many of the best entrepreneurs from leaving the country for lack of funding to support their rapidly growing businesses.
A government spokesman said: 'We've consulted extensively with business on our proposals, and we will continue to work closely with employers to ensure new laws work for them while putting money back into the pockets of working people.'
Responding to the select committee report, a government spokesman said ministers were working on 'creating the best possible conditions for the private sector to thrive.'
Broaden your horizons with award-winning British journalism. Try The Telegraph free for 1 month with unlimited access to our award-winning website, exclusive app, money-saving offers and more.