Nearly every small business in Britain is gearing up for staff cuts in the wake of proposed changes to employment law, according to a survey by the Federation of Small Businesses (FSB).
The survey of 1,270 companies found that 92 percent fear the new legislation will undermine hiring and expansion plans, while almost a third plan to reduce headcount in the coming year.
The bill, which is currently being examined by committee in the House of Commons, aims to tackle what ministers describe as a balance of power between employers and employees. Measures include ending zero-hours contracts, expanding statutory sick pay, strengthening trade union rights and offering workers protection against unfair dismissal from the first day of their employment.
Critics, especially from small businesses, argue that these changes could increase business costs and undermine already fragile trust. The impact on costs could be exacerbated by recent budget measures, including Chancellor Rachel Reeves’ £40 billion in tax increases and a 6.7 percent increase in the minimum wage, both of which will come into effect this year.
Tina McKenzie, policy chair at the FSB, warned that “small businesses have made it crystal clear” that the bill will reduce their willingness to hire. She said they are concerned that the increased legal risks surrounding unfair dismissal claims could hinder recruitment and investment.
The Department for Business and Trade says the legislation is part of a broader effort to raise living standards and boost economic growth, noting that “this government is pro-business and pro-worker.” It points to his recent steps to address payment delinquencies and strengthen small business financing as evidence of his commitment.
KPMG and the Bank of England have each suggested that higher government spending could provide a short-term boost to the economy, although the central bank warned that inflation is likely to remain above target, potentially putting pressure on growth and the business confidence in 2024 and beyond.