Red tape to cost firms extra £23bn

Marion Dakers
A NEW swathe of employment laws will cost UK companies £23bn over the next four years, according to the government’s own figures, casting doubt on David Cameron’s pledge to foster private sector growth by cutting red tape.

Employment rules brought in by the UK and the EU will cost firms a total of £22.87bn between now and 2015, according to figures compiled by the British Chambers of Commerce from the government’s impact assessments.

Despite Cameron’s promise of an “employer’s charter” last month, a minefield of rules on everything from agency workers to employee training and pensions reform will more than wipe out any financial gains for businesses. In 2011 alone, new rules will cost firms up to £1.4bn, with changes to employers’ national insurance contributions responsible for most of the burden.

The coalition has also argued in its assessments that the removal of the default retirement age this October will save employers £47.8m a year thanks to a better labour supply and less paperwork – a claim that has been widely disputed by industry bodies such as the CBI.

The director general of the British Chamber of Commerce David Frost, said: “Unless the government reduces this kind of red tape, we will continue to have high levels of unemployment and could end up derailing the recovery. Companies cannot generate growth and create jobs when they are facing a £23bn bill, just to implement new employment legislation,” added Frost.

Businesses must also comply with the EU’s Agency Workers Directive from October, which will cost employers £1.55bn a year once they are required to treat agency workers equally after three months’ work.

EU rules do not count as extra regulation under the government’s “one in one out” policy intended to limit the cost of red tape.

A spokesperson for the Department of Business, Innovation and Skills said last night that many of the costly rules are currently under review, adding: “The aim of our ongoing employment law review is to ensure that the balance between business confidence, economic growth and fairness to employees is right.”


EU agency workers directive -
starts in October 2011 - will cost
UK businesses £1.55bn a year

UK pensions reform -
October 2012 - £4.5bn a year

National Insurance changes -
April 2011 - £1.2bn a year

Right to request time off work to
train - April 2011 - £175m a year

Minimum wage increase -
October 2011 - £42.6m a year

Total cost to
businesses through
to 2015: