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A group of ten leading economists and labour lawyers has debunked claims by business leaders that Labour’s Employment Rights Bill will stifle UK economic growth.
In an open letter, published by the Institute for Employment Rights (IER), the group argues that evidence overwhelmingly shows stronger worker protections can enhance productivity, support demand and create a more stable economy.
In the letter, published as the bolstered Employment Rights Bill goes to report stage at the House of Commons on 11 and 12 March, the economists and labour lawyers challenge assertions made by business groups, including the CBI, that the Bill represents a “thicket of regulation” that will prevent them from “creating the high-quality, secure jobs which we all want to achieve”.
It comes as twenty Labour MPs in ‘red wall’ seats wrote to Reform UK MPs today calling on them to set out their position on the pivotal workers’ rights bill. Reform’s five MPs all voted with the Conservatives against the Bill during its first debate. Labour are tightening the screws on the embattled far-right party over anti-worker policies.
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Polling published by TUC and Hope not Hate in February revealed huge support across the country and across the political spectrum for the Employment Rights Bill flagship policies.
The mega poll of 20,000 voters showed that banning zero hours contracts by giving workers a contract that reflects their regular hours is incredibly popular. The bill will ban nearly all zero-hours contracts.
More than seven in ten (72%) of UK voters support a ban on zero hours contracts – including two in three Reform (65%) and Conservative (63%) voters from the 2024 general election. The figure is even higher with those saying they would vote Conservative (65%) and Reform (67%) if there was a general election held tomorrow. Just 15% oppose the policy.
There are also similar levels of support for plans to give all workers statutory sick pay from day one, and to give all workers protection from unfair dismissal from day one.
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So far in the face of business lobbying, the Government has introduced amendments which actually strengthen protections for workers. Amendments from ministers this week include strengthening flexible working, greater protections for those who report sexual harassment, and greater rights for union Equality reps.
It will also extend the zero-hours contract ban to agency workers. Meanwhile, ministers have announced a doubling of penalties for businesses who fail to collectively consult on redundancies, to deter rule-breaking.
Lawyer Ben Smith, a senior associate at GQ Littler did point to one ‘weakening’ of the bill in the face of business lobbying. “Employers will be able to implement probation periods of up to 9 months, during which there is a promise of a “lighter touch” dismissal procedure for some, but not all, dismissals. This will likely soften the impact of the removal of the unfair dismissal qualifying period.”
“It was reported that unions had been pushing for a maximum of 6 months, so it seems like the pro—business argument has won out.”
But the economists and labour lawyers behind the IER letter dispute claims from the Federation of Small Businesses (FSB) that the Bill will “wreak havoc” on an already fragile economy, saying this fails to recognise the broader economic benefits of fair labour laws.
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Attendees at the Hope Not Hate event in Westminster heard that Reform now “presents a genuine threat” to the UK
The group argues that “labour laws need not deter private investment and can complement improvements to public infrastructure… Over time, as their effects feed through to the wider economy andGovernment finances, labour laws largely pay for themselves.”
Signatories include Ozlem Onaran, professor of economics at the University of Greenwich, and two Cambridge professors including Simon Deakin, Professor of Law.
And the academics argue that “labour laws do not, on the whole, have negative economic consequences, and may well have positive ones.”
The group highlights that employment protection laws lead to better job security, which incentivises firms to invest in worker training and capital improvements, ultimately boosting productivity.
Professor Ozlem Onaran, one of the signatories of the letter, said: “Britain was a pioneer in labour legislation and history shows that stronger employment rights contribute to economic stability rather than hinder it. The notion that protecting workers harms growth is not supported by serious economic research.”
Some in the business community have claimed that the Bill’s introduction of day-one rights against unfair dismissal, the ban on zero-hours contracts, including for agency workers, and changes to Statutory Sick Pay will harm businesses, particularly small and medium-sized enterprises (SMEs). But the group dismisses this argument as misleading.
“SMEs especially benefit from effective labour law enforcement and inspection, which limit the scope for undercutting. Ultimately, nobody gains from a race to the bottom,” said the letter signatories.
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They are also seeking to overturn workplace protections from sexual harassment, calling them an attack on “free speech”
Higher wages, resulting from strengthened collective bargaining rights, boost consumer spending and strengthen the tax base, the signatories argue.
“Labour laws promoting collective bargaining tend to raise wages and stabilise employment,” Professor Onaran said. “Higher wages increase demand for locally produced goods and services, which directly benefits businesses.”
The academic added: “The idea that weaker worker protections are necessary for growth is fundamentally flawed. This does not create a sustainable economic model—it simply increases inequality and instability.”
Academics and lawyers from the IER – a think tank supported by unions and law firms – are calling for the Employment Rights Bill to go further.
Despite Government claims that this is the biggest upgrade to workers’ rights in a generation, the IER experts argue that it leaves significant gaps that will allow exploitative employment practices to persist.
Lord John Hendy KC, chairperson of the Institute of Employment Rights and a signatory of the letter, said: “Stronger employment protections are not an obstacle to economic growth but a driver of stability, productivity and fairness.
“This Bill is an important first step in addressing the failures of deregulation, but it does not go far enough. Without decisive action to close loopholes, strengthen enforcement and deliver the protections workers need, the UK will remain out of step with European and international labour standards.
“This is a once in a generation moment to get it right and rebalance the power relationship between workers and employers in the UK.”
You can read the letter here.
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