Concern grows over UK labour market ‘erosion’

An assessment of the UK’s “business credentials” by the CBI has raised concerns about the declining competitiveness of the UK as a place to do business.

The CBI has warned that competitor countries are threatening "to steal a jewel in the crown of the UK economy".

The first of a series of publications on Britain as a place to do business, the organisation claims the reports are the most comprehensive-ever CBI assessment of UK business credentials.

The first report in the series compared Britain's labour market flexibility with the US, Germany, France, Spain and Holland. It concluded that these countries were “closing the gap” with the UK, which has the most flexible labour market in the EU and the lowest unemployment.

Warning against a "relentless build-up" of employment regulation, which was eroding strengths such as “freedoms to change work patterns and workforce numbers”, and "appallingly low" levels of basic skills, the CBI report claimed that key competitors were removing layers of labour regulation.

The CBI also revealed the findings of a survey showing that labour costs are the main reason UK firms relocate overseas. Over half of the firms that have moved or were considering moving abroad cited “labour cost” as the most important factor.

Digby Jones, CBI Director-General, said: "Labour market flexibility has been a jewel in the crown of the UK economy for 20 years, but other countries are threatening to steal that jewel.

"In areas where the UK is strong, we are moving in the wrong direction. In areas where the UK is weak, our improvement is only patchy. The price could be extremely high because our competitors are closing the gap."

(SP)