A group of ten economists and labour lawyers has rejected claims by business leaders that the proposed Employment Rights Bill will harm economic growth.

The signatories – including Ozlem Onaran, professor of economics at the University of Greenwich and Jonathan Michie, professor of innovation and knowledge exchange at the University of Cambridge – argue that stronger worker protections can enhance productivity and create economic stability.

In an open letter published on the Institute for Employment Rights (IER) website, the group disputes assertions made by business organisations such as the Confederation of British Industry (CBI) that the Bill would create excessive regulation and hinder job creation. Instead, they state that “labour laws do not, on the whole, have negative economic consequences and may well have positive ones”.

The letter argues that employment protection laws improve job security, encourage investment in worker training and capital improvements and ultimately boost productivity.

Professor Onaran commented, “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.”

Impact of Employment Rights Bill on Businesses and Wages

Some business groups have expressed concern over measures in the Bill, including the introduction of day-one rights against unfair dismissal, a ban on zero-hours contracts (including for agency workers) and changes to Statutory Sick Pay. The Federation of Small Businesses (FSB) has argued that the Bill could “wreak havoc” on an already fragile economy. However, the economists and labour lawyers dismiss these claims, stating that SMEs benefit from effective labour law enforcement, which prevents unfair competition through undercutting.

The group also highlights the economic benefits of strengthened collective bargaining rights, arguing that higher wages contribute to greater consumer spending and a stronger tax base.

“Labour laws promoting collective bargaining tend to raise wages and stabilise employment,” Professor Onaran added. “Higher wages increase demand for locally produced goods and services, which directly benefits businesses.”

The letter further challenges the argument that labour protections deter private investment, asserting that well-designed employment laws can complement improvements to public infrastructure and economic growth. The signatories argue that, over time, the economic benefits of fair labour laws outweigh their costs, as they lead to a more stable and productive workforce.

Calls for Stronger Worker Protections

While acknowledging that the Bill represents progress, the group argues that it does not go far enough in addressing exploitative employment practices. The IER, a think tank supported by trade unions and law firms, calls for further measures to strengthen enforcement and close legal loopholes that allow poor working conditions to persist.

Lord John Hendy KC, chairperson of the IER and a signatory of the letter, spoke of the need for a comprehensive approach to employment rights.

“Stronger employment protections are not an obstacle to economic growth but a driver of stability, productivity and fairness,” he said. “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.”

He added that this is a “once in a generation moment” to rebalance the power relationship between workers and employers in the UK.