Luke Johnson, chairman of the Gale bakery chain and a prominent businessman, has warned that some of his companies “may not survive” under Labour’s proposed labor rights reforms.
Speaking before the Employment Rights Bill Committee, Johnson expressed concerns about the additional costs and complexities the legislation could impose on small and medium-sized businesses.
“In some cases, some of my companies may not be able to survive next year,” he told ministers. Johnson, who has a diversified portfolio including investments in Brompton Bicycles and Revolution Bars, stressed that insolvency professionals expect a significant increase in corporate collapses due to the difficult economic climate.
He stressed that the timing of the Employment Rights Bill was “incredible”, especially after the recent tax increases announced in the October Budget. The combination of high taxes and increasing regulatory burdens can overwhelm small businesses that lack extensive human resources departments, Johnson said.
“The idea that companies that can barely afford any form of HR can afford a big new 150-page bill for 28 procedures — they won’t even have time to read it,” he said. “You’ll never know, until you get a big court, what the real cost is.”
Labour’s proposed reforms aim to strengthen workers’ rights by providing greater job security, stronger flexible working provisions, and increased powers for unions. Employees will also have the ability to take their employers to court from their first day of employment. While these changes are intended to protect workers, some business leaders are concerned about the potential impact on operational costs and hiring practices.
The government’s impact assessment suggests the reforms could cost businesses up to £4.5 billion. Alex Hall-Chin, head of policy at the Institute of Directors, warned that the reforms could prevent companies from hiring new employees, especially those considered “borderline candidates”, because of the increased risks and costs associated with employment disputes.
Andrew Griffiths, the shadow business secretary, has called for the bill to be delayed until comprehensive assessments of its impact are carried out. In a letter to Business Secretary Jonathan Reynolds, Griffiths said the bill could place “devastating and unacceptable burdens on businesses”, referring to findings by a watchdog that impact assessments carried out by the government were “not fit for purpose”.
Johnson’s comments highlight the tension between efforts to strengthen worker protections and the need to support businesses amid economic uncertainty. “Jobs don’t just fall from the sky, they appear because companies are created by risk-takers,” he said. “If you crush the private sector, you crush jobs. Without jobs, you don’t have a civilization.”
As ministers continue to consult on the proposed changes, they face the challenge of balancing workers’ rights and protection with the sustainability and growth of businesses, especially SMEs, which form the backbone of the UK economy.