Luke Johnson, chairman of the Gail’s bakery chain and distinguished entrepreneur, has warned that a few of his businesses “may not survive” within the face of Labor’s proposed labor rights reforms.
Speaking to the Employment Rights Bill committee, Johnson raised concerns concerning the additional costs and complexity the laws could impose on small and medium-sized enterprises (SMEs).
“In some cases, some of my businesses may not survive next year,” he told ministers. Johnson, who has a diversified portfolio that features investments in Brompton bicycles and Revolution bullion, stressed that insolvency specialists expect a pointy increase in company failures on account of the difficult economic climate.
He stressed that the timing of the Employment Rights Act was “unbelievable”, especially after the recent tax increases announced within the October Budget. Johnson argued that the mixture of upper taxes and increased regulatory burdens could overwhelm smaller corporations that lack robust human resources departments.
“The idea that companies that can barely afford any form of HR could stomach a big new bill that’s 150 pages in 28 measures, they won’t even have time to read it,” he said. “Until a big tribunal comes along, you never know what the true costs are.”
Labor’s proposed reforms aim to strengthen staff’ rights by providing greater job security, stronger flexible working rules and greater powers for trade unions. Employees would also find a way to take their employers to court from the primary day of employment. While these changes are intended to guard staff, some business leaders are concerned concerning the potential impact on operating costs and hiring practices.
The government’s own impact assessment shows the reforms could cost businesses as much as £4.5 billion. Alex Hall-Chen, head of policy at the Institute of Directors, warned that the reforms could discourage corporations from hiring latest staff, especially those considered “borderline candidates”, on account of the increased risks and costs related to labor disputes.
Andrew Griffith, the shadow business secretary, called for the bill to be deferred until a comprehensive impact assessment has been carried out. In a letter to Business Secretary Jonathan Reynolds, Griffith said the bill had the potential to impose “disruptive and unacceptable burdens on business”, referring to the watchdog’s findings that the federal government’s impact assessments were “not fit for purpose”.
Johnson’s comments highlight the strain between efforts to extend employee protections and the necessity to support businesses amid economic uncertainty. “Jobs don’t just fall out of the sky – they come because companies are created by risk-takers,” he said. “If you crush the private sector, you crush jobs. There is no civilization without work.”
As ministers proceed to seek the advice of on the proposed changes, they face the challenge of balancing staff’ rights and protections with the sustainability and growth of businesses, particularly SMEs, which form the backbone of the UK economy.
