Labour’s Employment Rights Bill could cost business up to £5bn a year, government analysis shows
Overhauling workers’ rights could cost businesses around £5bn a year, the government has said.
The Employment Rights Bill, which aims to tackle low pay and poor working conditions, is being debated by MPs today as it passes through its next stage in parliament.
Within the bill are a series of reforms branded the biggest overhaul in a generation, including granting workers protection from unfair dismissal from the first day of their employment, the right to statutory sick pay from the first day of illness and the right to flexible working.
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Unions will also be given the right to access workplaces and there will be a ban on “exploitative” zero hours contracts.
But in the government’s own impact assessment published today, the Department for Business and Trade acknowledged that the new measures could cost businesses up to £5bn a year as they adjust to the new legislation and take on administrative and compliance costs.
It also warned that the volume of cases reaching mediation service and employment tribunal could increase by around 15% if there are disagreements between employees and employers over rights.
The impact assessment is the first time the government has revealed the cost of the reforms that are being spearheaded by Deputy Prime Minister Angela Rayner and Business Secretary Jonathan Reynolds.
Angela Rayner is spearheading the reforms
Unions have praised the bill as “life changing” for millions of workers and say it will also benefit employers in the form of a healthier and happy workforce and boosted productivity.
However, Kevin Hollinrake, the shadow business secretary, criticised the bill as “bad for jobs and wages” and “particularly bad for small businesses”.
He said “day one rights” to sick pay and an employment tribunal as well as the right to demand a four-day week could be “existential for many small businesses”.
“Labour need to stop, listen and think again, at the very least exempting SMEs from this catastrophe,” he posted on X.
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The right to statutory sick pay from the first day of illness will end the current three-day waiting period and remove the lower earnings limit, while the right to flexible working will mean that employers who refuse requests will have to demonstrate why they think their decision is reasonable against eight criteria.
The bill will also introduce day one rights to paid and unpaid paternity leave, meaning 30,000 new fathers will qualify for paternity leave. Currently, fathers have to be employed for 26 or 52 weeks respectively to receive the benefits.
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In the economic impact assessment, the government acknowledged there could be “unintended consequences”, including the risk that “higher labour costs could reduce demand for work, damaging the employment prospects of the same workers the package is trying to support”.
The government said that despite such risks, the package will be “significantly positive for society” owing to improved wellbeing and health.
Although the bill is going through its second reading in the House of Commons, the consultation required means officials do not expect many of the 28 measures in the bill to reach the statute book until autumn 2026 at the earliest.
Donald Trump’s victory was secured on an unequivocal promise to stretched American households that he would “end inflation”, but markets and economists are anticipating his second term will do the opposite.
A combination of corporate tax cuts, government borrowing, lower migration and swingeing tariffs on overseas imports are all expected to heat up the American economy and stoke price rises.
Bond yields on 10-year US Treasuries, effectively the price of borrowing for the American government, were up by 3.6% overnight, rising more than 15 basis points to above 4.4% as European markets opened.
That signals investors believe that borrowing will rise, and the Federal Reserve will be forced to slow rate cuts in order to tackle inflation.
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A clearer picture will emerge on Thursday when Federal Reserve chairman Jay Powell, who Mr Trump said will not be reappointed, announces the next move on rates.
Markets still expected a 0.25 percentage point cut (a similar move to that anticipated from the Bank of England earlier in the day) but Mr Powell’s comments will be scrutinised for signals of what Trump 2.0 means for the prospect of further cuts.
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But higher prices for consumers are not necessarily bad news for corporate America, with the dollar surging against sterling and the euro as swing states fell to Mr Trump, and Wall Street futures trading indicating a rally when they reopen with him confirmed as president-elect.
Shares in US banks were boosted with J.P. Morgan, Goldman Sachs and Morgan Stanley all up more than 6% in pre-market trading, along with Tesla, boosted by more than 13% as markets anticipate a dividend for Elon Musk’s campaign-trail support.
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Defence stocks were higher too and not just in the US – BAE Systems and Rolls Royce were both up – reflecting likely pressure on America’s NATO allies to make good on their commitments to increase spending.
Bitcoin was also positive in anticipation of a more benign regulatory environment from a president who used the campaign platform to launch his own cryptocurrency.
By contrast renewable holdings, the target of much of Joe Biden’s economic stimulus, were in negative territory, with wind and solar priorities likely to be replaced by a pledge to “drill baby, drill”.
Of most concern to America’s trading partners and allies will be Mr Trump’s promise to erect barriers to free trade.
The man who said tariffs “is the most beautiful word in the world” has pledged a 60% levy on Chinese imports and 10% on those from elsewhere, a deeply protectionist move that could trigger a trade war with China and the EU.
These can only increase prices in the US, with importers paying the levies at the point of entry, and other trading blocs likely to respond in kind.
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The EU has already imposed its own 35% tariff on Chinese EVs to the dismay of the continent’s carmakers the measure is intended to protect.
While these tensions play out, post-Brexit Britain, a relatively small player outside the major trading blocs, is likely to be a spectator.
Post Office campaigner Sir Alan Bates is yet to receive a reply from Sir Keir Starmer, despite writing to him over a month ago.
Sir Alan said he had written to the prime minister to remind him the “clock is still ticking” on a financial redress deadline for victims.
In his letter, he demanded a March 2025 deadline for compensation for sub-postmaster victims of the Horizon scandal.
Sir Alan confirmed to Sky News he was yet to hear back from the prime minister.
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“It was over a month ago,” he said.
“I sent him a reminder yesterday. I told him the clock is still ticking and it’s now five months from the March deadline, which I’m told is still achievable by other professionals.
“So let’s get on with it, that’s all we want. Get on with it.”
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