Employers believe the UK will become less attractive to investors if the government’s new employment policies are introduced in their current form, according to a survey.
Research by the Confederation of British Industry found that 62% of respondents think the UK will become a slightly (26%) or much less (36%) attractive place to do business in the next five years if the reforms go ahead unaltered.
The latest annual CBI/Pertemps Employment Trends Survey revealed that almost two in five (39%) firms view the employment regulation on flexibility as a threat to the competitiveness of the labour market, jumping to nearly three in five (58%) in the next five years. This is the key change in future risks to competitiveness identified by those polled, with other most commonly identified threats including skills gaps (71%), labour shortages (58%) and labour costs (56%).
Just one in four employers were positive they could absorb additional costs from the anticipated employment law changes without it impacting investment, growth, jobs or employee benefits. More than half (54%) of respondents either disagree or strongly disagree that they would be able to afford the greater costs expected from the reforms without encountering unintended consequences.
Matthew Percival, CBI future of work and skills director, said: “We share the government’s primary mission to boost investment in the UK to deliver long-term, sustainable growth and raise living standards for people across the country. It has set a clear direction through its make work pay plan to support workers.
“While business recognises the objectives of many of these reforms, the lack of detail about how they will be achieved has created damaging uncertainty. Businesses are concerned that achieving these goals in the wrong way risks significant unintended consequences for growth and for workers.
“The hard reality is that companies are already struggling to keep up with the pressures on their bottom lines, especially SMEs, and that further pressure from employment costs will inhibit their ability to invest, hire and grow.”
According to the CBI, collaboration with business is essential to reassure employers about the effects of reforms on labour flexibility.
Percival added: “Working collaboratively with business to develop the detail as the government turns its ideas into legislation will be critical to making a success of the plan to ‘make work pay’ while simultaneously delivering the objective of reaching their 80 per cent employment target.
“For instance, taking on a new employee is often seen by business as taking a risk, particularly for small businesses. While the government has said that businesses can use probation periods, the possibility of decisions at the end of probation being challenged at employment tribunal has 75 per cent of respondents saying they’d be more cautious about taking on new staff. This can be avoided with well-designed policy where the government applies new probation rules that require only a light touch process for dismissal. Harnessing the voice of business as part of a two-way conversation will lead to a fruitful partnership with government bearing better policy decisions.”
He believes that a timeline which allows firms to co-develop policy and prepare for the changes will help “drive certainty and confidence”, while a public commitment to ensuring the new probation rules are ready before the old ones are removed would “smooth the transition to a fair and flexible labour market that is fundamental to growth and works effectively for both employee and employer”.
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