Employment Rights Bill now calculated as causing a likely £38 billion hit to the economy

Employment Rights Bill now calculated as causing a likely £38 billion hit to the economy

As MPs again debate the Government’s Employment Rights Bill, new Growth Commission calculations of the potential impact of the legislation provide further cause for concern about the likely hit to economic growth.

Last week the non-partisan Commission comprising thirteen international economists established a likely hit to UK GDP of £23 billion over a five-year period from application of the law, despite the Government’s decision to increase the qualifying period for unfair dismissal rights from one day to six months.

However, now taking the potential for unlimited compensation awards at employment tribunals into account in their calculations, The Growth Commission has estimated the likely total hit to growth as being £38 billion.

The Growth Commission has once again used its Anti-Competitive Market Distortions Model to quantify the likely impact of the measures and we find that there would now be an additional £15 billion hit, amounting to £38 billion.

Shanker Singham, Chairman of The Growth Commission, said:

“This single piece of legislation continues to severely curtail the Government’s growth ambitions. Ministers would do well to remember that what chills the ability to fire, also chills the ability to hire – something they should pay heed to as the UK’s labour force participation rate continues to drop.

“While the lifting of the application of certain day one protections in the Bill was welcomed by The Growth Commission, all those gains have now been undercut by this latest change – a case of the Government taking with one hand and giving with the other.”

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