Luke Johnson, the chairman of Gail’s bakery chain and a prominent entrepreneur, has warned that some of his businesses “might not survive” under Labour’s proposed workers’ rights reforms.
Speaking to the Employment Rights Bill committee, Johnson expressed concerns over the additional costs and complexities that the legislation could impose on small and medium-sized enterprises (SMEs).
“In some cases, some of my companies might not survive next year,” he told ministers. Johnson, who has a diverse portfolio including investments in Brompton bicycles and Revolution Bars, highlighted that insolvency specialists are anticipating a surge in company collapses due to the challenging economic climate.
He emphasised that the timing of the Employment Rights Bill was “beyond belief,” especially following recent tax increases announced in October’s Budget. Johnson argued that the combination of higher taxes and increased regulatory burdens could overwhelm smaller businesses that lack extensive human resources departments.
“The idea that companies that can barely afford any form of HR could stomach a big new bill of 150 pages in 28 measures—they won’t even have time to read it,” he said. “You never know, until you get a big tribunal, what the real cost is.”
Labour’s proposed reforms aim to enhance workers’ rights by providing more job security, stronger flexible working provisions, and increased powers for unions. Employees would also have the ability to take employers to tribunals from day one of their employment. While these changes are intended to protect workers, some business leaders are concerned about the potential impact on operational costs and hiring practices.
The government’s own impact assessment suggests that the reforms could cost businesses up to £4.5 billion. Alex Hall-Chen, head of policy at the Institute of Directors, warned that the reforms might deter companies from hiring new staff, especially those who are considered “borderline candidates,” due to the increased risks and costs associated with employment disputes.
Andrew Griffith, the Shadow Business Secretary, has called for the bill to be delayed until comprehensive impact assessments are conducted. In a letter to Business Secretary Jonathan Reynolds, Griffith stated that the bill could place “destructive and unacceptable burdens on business,” referencing a watchdog’s findings that the government’s impact assessments were “not fit for purpose.”
Johnson’s remarks underscore the tension between efforts to enhance worker protections and the need to support businesses amid economic uncertainties. “Jobs don’t just fall from the sky—they appear because companies are created by risk-takers,” he said. “If you crush the private sector, you crush jobs. Without jobs, you don’t have civilisation.”
As ministers continue to consult on the proposed changes, they face the challenge of balancing the rights and protections of workers with the sustainability and growth of businesses, particularly SMEs that form the backbone of the UK economy.