Employment law red tape costs businesses £12.3bn, says CBI

The Confederation of British Industry has put the cost to business of red tape created by the government’s employment legislation at £12.3bn. The figures are contained in a new report by the CBI that examines the impact of a range of recent policies from statutory union recognition to the working time directive. And it urges […]

The Confederation of British Industry has put the cost to business of red tape created by the government’s employment legislation at £12.3bn.

The figures are contained in a new report by the CBI that examines the impact of a range of recent policies from statutory union recognition to the working time directive. And it urges politicians not to promise further rights for workers in the run-up to next year’s general election.

The CBI also criticises the government for introducing its policies too quickly, leaving business struggling to cope. It says excessive amounts of red tape are being created as a result of poor drafting, consultation, and hasty implementation.

CBI director general Digby Jones said: ‘Excessive red tape has caused most of the headaches rather than the rights themselves. This has led to an incalculable cost, with firms diverting resources into administration and missing out on business opportunities.

‘It is also obvious that many firms have been struggling with the pace of the changes, some of which are yet to come into effect. The government must give business a bigger breathing space.’

Based on responses from more than 400 companies, the report estimates the cumulative cost of legislation introduced since 1997 up to the end of 2001.

It identifies the two biggest culprits as the red tape created by the working time directive, which cost an estimated £7bn, and the implementation of the national minimum wage which cost business £4.5bn. Even a measure such as statutory union recognition is reckoned to have generated further costs of £4.3m.

The CBI said 55% of the organisations surveyed regarded the amount of administration generated as unacceptable.

A further 61% said they had insufficient time to implement policies, while 43% said administrative tasks were having a significant negative impact.

The report adds that one in five companies (22%) actually cut staff as a result of the legislation they were required to implement. Around 42% said that meeting the requirements cut profit margins, and 10% had considered relocating parts of their business outside the UK.

Trade and industry secretary Stephen Byers said: ‘If the CBI can identify areas of excessive bureaucracy I will tackle them. But what I am not prepared to do is deny people decent conditions at work.’

Helen Rowe writes for Personnel Today magazine