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The five largest UK business groups have warned that the government’s flagship workers’ rights bill “will have deeply damaging implications” for economic growth, as they urged peers to amend the legislation in the House of Lords.
In an open letter to legislators on Thursday, the so-called B5 industry groups raised concerns about planned reforms to unfair dismissal, a right to guaranteed hours contracts, a near ban on contentious “fire and rehire” practices, and new powers for trade unions.
The letter was signed by the British Chambers of Commerce, the CBI, the Institute of Directors, the Federation of Small Businesses, and Make UK.
“As currently drafted, the [employment rights] bill will have deeply damaging implications for the government’s priority growth mission”, as well as ministers’ plans to tackle rising economic inactivity — particularly among young people, the business groups said.
Calling on peers to “fully scrutinise and improve this legislation” to ensure it was both pro-business and pro-worker and “to prevent unnecessary harm to employment and growth”, the groups said the bill was “a recipe for damaging, not raising, living standards” at present.
Prime Minister Sir Keir Starmer has framed the legislation, a key pillar of Labour’s election manifesto last year, as the biggest upgrade to workers’ rights for a generation. But official estimates have put the cost of the package of reforms to businesses at up to £5bn a year.
The legislation is due to enter committee stage in the House of Lords, UK parliament’s upper chamber, later this month, when peers will have an opportunity to put forward and vote on amendments.
The business groups warned that the introduction of so-called day one protection against unfair dismissal would hit businesses’ confidence to hire new staff.
They insisted that employers must be able to dismiss without risk of facing an unfair dismissal claim at tribunal during the nine-month probation period.
The B5 also said increases to statutory sick pay liability would “disproportionately burden those firms who are most likely to employ those who are likely to be off sick”, calling for the bill to be amended to restore a statutory sick pay rebate.
Sweeping upgrades to union rights were another sticking point, with the groups saying that the current plan removed accountability mechanisms on unions and was a “recipe for conflict not for co-operation”.
Andrew Griffith, Conservative shadow business secretary, said on X that “for the UK’s top business groups to call for a rethink sends a powerful message”, and claimed that ministers were struggling to point to any support for the legislation from industry.
Whitehall figures hit back, highlighting public support for elements of the legislation from groups including Centrica, Richer Sounds and Co-op.
The government said it had “delivered the biggest upgrade to workers’ rights in a generation, and our measures already have strong support among business and the public”.
Highlighting the extensive consultation that the Department for Business and Trade has launched with business on the proposals, it added: “We will engage on the implementation of legislation to ensure it works for employers and workers alike.”
