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£127bn lost to the UK economy each year over pay discrimination

Pay discrimination on the grounds of ethnicity, gender and sexual orientation is costing the UK £127bn ever year – and it’s not just the employees that miss out.
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Pay discrimination is costing the UK economy around £127bn in lost output each year – with £123bn accounted for by gender discrimination alone.

In addition, £2.6bn was due to pay discrimination against ethnic minorities, and £2bn was due to discrimination over sexual orientation.

This is according to a report by Involve, a membership organisation that champions holistic diversity and inclusion in the workplace, and Cebr, an economics consultancy.

While discrimination is clearly a terrible thing in itself, the report highlights how it can also have a negative effect on both the offending businesses’ bottom lines, and the wider economy.

Analysis of over 500 workplaces found a significant positive correlation between diversity and financial performance. In other words, the most diverse workplaces in terms of gender, ethnicity and sexual orientation perform better – in fact, such companies are 12 per cent more likely to outperform industry averages.

Furthermore, businesses that were actively aiming for a diverse workforce – for example, those with a strong diversity policy, actively monitoring and measuring diversity and recruitment processes – were likely to outperform industry averages by as much as 15 per cent.

Suki Sandhu, founder and CEO of Involve, commented: “Business is led by its bottom line. This report is a timely reminder of the crucial role a diverse workforce plays in corporate success. The economic rewards speak for themselves, and the social ones are equally invaluable.

“In the current climate, where the fight for equality and balanced representation is being fought on many fronts every day, we need businesses to stand up and work to drive change in our society and our workplaces; to ensure that everyone, no matter their gender, heritage or sexuality, is given an equal opportunity to thrive and reach their full potential.”

Christian Jaccarini, economist at the Centre for Economics and Business Research, likewise said: “Firms seeking a competitive advantage ought to consider both how to achieve a more diverse workforce and what pro-diversity policies can be put in place, as our research shows the most diverse firms and the most pro-diversity firms are more likely to be top performers.”

According to Jaccarini, the Cebr’s upper-bound estimate finds that UK GDP would be around seven per cent higher if workplace discrimination based on gender, sexual orientation and ethnicity was eliminated. At the economy’s current rate, that growth would take just under four years to achieve.

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About Author

Letitia Booty

Letitia Booty is a special projects journalist for Real Business. She has a BA in english literature from the University of East Anglia, and since graduating she has written for a variety of trade titles. Most recently, she was a reporter at SME magazine.

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