Chancellor Rachel Reeves is facing pressure from the business community, as fresh warnings emerge over Labour’s flagship Employment Rights Bill and its potential fallout on economic recovery efforts.

The British Retail Consortium (BRC), which represents the interests of UK retailers, has issued a sharp rebuke of the proposed legislation. A recent BRC survey revealed that more than half of retail human resources directors believe the bill will negatively affect hiring practices and job flexibility. Even more striking, 70 percent of respondents warned that the bill could damage their business operations.

The concerns coincide with a critical House of Lords debate on the bill set for Tuesday, April 29. With the legislation taking centre stage, Reeves finds herself in a tightening bind, juggling economic stagnation and escalating criticism just nine months into Labour’s term in office.

Adding to the strain, Reeves has been grappling with public discontent over tax increases and benefit reductions. Outrage has erupted over recent national insurance hikes, cuts to welfare support for the disabled, and the reduction of winter fuel payments affecting 10 million pensioners.

Last week, the chancellor travelled to Washington, D.C., in a bid to improve trade relations with the United States. During her visit, Reeves attempted to bolster investor confidence in the UK’s economy and pursue a potential trade deal with President Donald Trump.

There are now hopes that upcoming Brexit reset talks with the EU, featuring trade commissioner Maroš Šefčovič, may offer some relief. A new deal is expected to be announced on May 19, potentially injecting momentum into Reeves’ agenda.

Nevertheless, the backlash at home shows no sign of slowing. The Confederation of British Industry (CBI) has issued stark warnings, noting that private sector firms are anticipating a dip in business activity over the next quarter. According to the CBI’s latest Growth Indicator Survey, a weighted balance of -21 percent signals expected contraction in activity from May to July.

The services sector is especially vulnerable, with projected business volume declines of 26 percent. This outlook marks the lowest expectations since November 2022. The decline spans both business and professional services, forecast at -22 percent, and consumer services at a dramatic -41 percent.

The retail and distribution sectors are also bracing for a slowdown, with expected sales dropping by 23 percent. In contrast, manufacturers anticipate only a slight reduction in output, forecasting a more modest 5 percent dip.

Economic Pressures Affecting Growth

CBI deputy chief economist Alpesh Paleja cited a range of economic pressures contributing to the downturn.

“Global volatility is another drag on business sentiment, already hit by the rise in National Insurance Contributions and the National Living Wage, and continued concern over the Employment Rights Bill.”
Alpesh Paleja

The BRC’s chief executive Helen Dickinson echoed those sentiments, raising alarm over the bill’s potential to destabilise the retail labour market.

“Those in charge of retail hiring are clear – unless amended, the bill will make it even harder to keep and create jobs and reduce the flexibility that defines many existing retail roles.”
Helen Dickinson

Despite mounting opposition from business groups, Labour’s traditional allies — the trade unions — are holding firm. The Trades Union Congress (TUC) has insisted that the Employment Rights Bill must proceed in full.

“Stronger workers’ rights means a happier, healthier and more productive workforce. The government has been at pains to engage unions and employers – large and small – in designing these new reforms. Most businesses already do the right thing, and this will level the playing field for those good employers.”
TUC general secretary Paul Nowak

Meanwhile, the Resolution Foundation has released a report advising the government to focus its limited spending power on key areas such as health and housing if it hopes to improve living standards. The think tank’s analysis also highlighted secondary priorities, including public transport and the prison system, which may come under consideration during June’s spending review.