Labour's Growth Strategy in Tatters as Unemployment Climbs and Business Confidence Plummets
If actions speak louder than words, the current Labour government's commitment to economic growth appears non-existent. A series of legislative moves and policy announcements, from tax hikes on businesses to the controversial Employment Rights Act, suggest a administration that either ignores or actively undermines growth as the UK's most urgent challenge.
Business Backlash and Hiring Freezes Signal Economic Distress
The Chartered Institute of Personnel and Development's latest survey delivers a stark warning: 37% of businesses plan to reduce hiring permanent staff as a direct result of the Employment Rights Act. This alarming statistic adds to a growing chorus of concern, with three-quarters of businesses asserting that the bill will damage growth and overall confidence collapsing across sectors.
Recent unemployment figures paint a grim picture, with the rate for all workers hitting 5.1%, significantly higher than in non-Covid years and even more severe for young people. Meanwhile, the 2025 growth rate was a paltry 1.3%, and on a per-capita basis, it actually declined in the final two quarters, marking the onset of a "personal recession." Prime Minister Keir Starmer's assurance that "we are headed in the right direction" rings hollow in the face of such data.
The Employment Rights Act: A Costly Burden on Workers and Businesses
Professor Len Shackleton of the Institute of Economic Affairs has extensively documented the detrimental effects of restrictive employment rights on the labor market. He criticizes the Employment Rights Act for imposing excessive red tape and mounting costs on businesses, estimated by the government to exceed £5 billion. Shackleton argues that these costs, akin to a stealth tax, will ultimately be borne by workers.
Furthermore, the Act grants additional powers to unions, potentially leading to more frequent and prolonged strike action. Even if strikes are avoided, the cost of prevention will rise for both private and public sectors, exacerbating economic strain.
A Government Without a Growth Strategy
As Shadow Secretary Wes Streeting noted, the government lacks a coherent growth strategy and fails to grasp the sources of economic expansion. Their initial belief that stability alone would spur growth by distancing themselves from Tory policies has proven flawed. Not only has stability been elusive, but this approach overlooks the critical link between stability and business confidence.
Stability only fosters growth when it boosts business confidence, encouraging investment in the UK over other locations. The private sector, as the engine of growth, requires support to innovate, hire, produce, and expand. Instead, the government's actions consistently hinder these efforts, leaving businesses disillusioned and the economy stagnant.
In summary, the Labour government's abandonment of growth is evident in rising unemployment, business retreats, and a legislative agenda that prioritizes union interests over economic vitality. Without a strategic shift, the UK faces prolonged economic hardship.
