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Employment law is damaging the economy

Do we really want to create an employment environment in the UK which mirrors that existing in EU” The whole thrust of employment statute emerging from the EU is based on making employment fair and protecting the employee from any number of possible abuses from the employer. It may be a worthy objective but there is one fundamental flaw – business isn’t fair.

Business is dynamic, fast moving and intensely competitive across a global market. Consumers will buy the best goods available at the most competitive price regardless of geographical source. For example, if company A is operating in an environment where employment costs are high and is competing with company B which enjoys a lower-cost environment, it will most likely lose business to company B and will ultimately be unable to protect its employees – regardless of what local statute may dictate.

And underlying all this, there is a significant element of hypocrisy. The EU employee enjoying a high level of employment protection will still, as a consumer, seek out the best and most competitively priced goods, even though that selection may make one of their fellow countryman’s job more vulnerable. Likewise, parents will enjoy all the benefits of extensive and costly maternity and paternity leave without acknowledging that the very existence of those benefits is likely to diminish the future employment prospects of their child.

If we carry on pretending that we can create some form of segregated employment Utopia, where everyone is protected from the realities of global competition, we will damage our economy and the employment prospects of our young people.

The EU’s approach to employment protection is ill-conceived and ultimately unsustainable. It works from a premise of Utopian fairness for all, which is totally inconsistent with the realities of the global market place.

And who are the biggest losers in all this” The young. As employment in the EU becomes ever more expensive and onerous, politicians seem surprised that we have record levels of youth unemployment across Europe. Young people who have invested years in education have effectively been betrayed by an older generation who, over the past 20 years, have engineered ever increasing employment protection for themselves without any real focus on the consequences.

If the UK wants to become a dynamic and entrepreneurial country, then we all need to wake up and understand that young businesses cannot survive with disproportionate and onerous employment costs. The two really are mutually exclusive; starting up a new venture is incredibly hard and adding to that burden with our current totally uncompetitive employment laws is simply the final straw. If you don’t believe me, just look at the failure statistics; every one of those failures is a personal tragedy, but more than that, just another step backwards for our economy.

If the Coalition government wants to address this issue, it should exempt all new start-up companies (with under ten employees) from whole tracks of employment law and cost (including NIC without geographical limitation). Employees will be at more risk of unfair dismissal etc, but take a moment to ask the young unemployed whether they would prefer to take a job with limited employment protection or languish on unemployment benefit?

Andrew McErlain is the chief executive of

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