Analysis-UK firms reassured by Labour's employment law proposals

By James Davey and Elizabeth Piper

LONDON (Reuters) - When Keir Starmer's Labour pulled ahead in the polls in 2023, British business leaders started to fret that, if elected, the opposition party would impose strict laws around hiring, firing, pay and conditions that would limit their growth.

But a year on, eight leading bosses say in interviews that they are more relaxed, and that engaging with the centre-left party gives them confidence they can strike a balance that works for workers, employers and the wider economy.

Opinion polls suggest Labour will win the July 4 election easily and end the 14-year rule of the Conservatives - once favoured by business before presiding over a messy exit from the European Union and years of political churn.

That has left room for Labour to try to gain the trust of company bosses.

"I've been encouraged by what I've heard, as have my peers," Alex Baldock, CEO of electricals retailer Currys, which employs 14,000 in Britain, told Reuters.

"Of course it's laudable to seek to protect people, but there needs to be a balance here and we need to make sure that the job creation and the flexibility that's really important to businesses and to colleagues isn't inadvertently damaged."

Labour says British employment laws are outdated, a drag on economic growth and a major factor in the UK's worst period of industrial relations since the 1980s.

It has pledged to ban "exploitative" zero hours contracts, end so-called "fire and rehire" practices, and introduce basic rights to parental leave, sick pay and protection from unfair dismissal from day one of employment.

It also plans to ensure the national minimum wage is a "genuine living wage", removing "discriminatory" age bands for younger earners, and has left open the door for a repeal of anti-strike laws put in place by the Conservative government.

LABOUR VOWS TO CONSULT BUSINESS, WORKERS, CIVIL SOCIETY

Starmer has been trying to move the party back to the centre ground from the left, seeking to work with companies while trying to retain the support of Labour's union backers, who say weak protections leave too many workers in a precarious situation.

Economic think tanks have previously described Britain as a laggard in the area of minimum employee benefits. But a tight labour market after Brexit and the COVID-19 pandemic has prompted some companies to up their game.

"The broad thrust of this is one that is good for Britain's workers and good for Britain's businesses," Jonathan Reynolds, Labour's business policy chief, told Reuters.

Reflecting concerns that the proposed measures could raise costs and reduce operational flexibility, Labour said it would "consult fully with businesses, workers, and civil society" on how to put the plans into practice before legislation is passed.

Ken Murphy, CEO of supermarket Tesco, which with a UK workforce of about 270,000 is Britain's biggest private sector employer, said he was "not unduly worried".

"Many of the measures outlined in proposed legislation we're already ahead of," he said, noting, for example, that Tesco already recognises an independent trade union.

Stuart Machin, CEO of retailer Marks & Spencer, one of the best known names in British business with 40,000 store workers, similarly told Reuters he was "not overly worried".

"Whoever comes in government, we want them to work seriously with business," he said.

Other big employers, including grocer Asda and baker Greggs, also said they were relaxed about the proposed changes.

RETAILERS SAY LABOUR PARTY HAS LISTENED

According to Helen Dickinson, head of the British Retail Consortium, which speaks for a sector employing 17% of workers, Labour's stance on zero-hours contracts is a case in point.

The contracts, which do not guarantee any set number of working hours, have prompted broad debate about the balance of power between employers and staff.

"The headlines a year ago were about banning zero-hours contracts, whereas the outcome presented by Labour is very different," she said, with an emphasis on getting rid of "exploitative" contracts and a recognition that some workers appreciate the flexibility of a zero-hours contract.

Dickinson said Labour's employment plans "had looked quite scary" initially, but that meetings with Reynolds and with Rachel Reeves, who will become Britain's finance minister if Labour wins, had changed that.

Currys' Baldock said he felt Labour had listened to his argument on the importance of retaining probation periods for new recruits.

But not everyone is happy. Unite, one of Britain's biggest unions, did not endorse Labour's manifesto, saying it was disappointed that the party had softened its proposed worker protections.

Reynolds rejected the idea that Labour had to choose between workers and employers.

"We want Britain's companies to make profits, we want them to employ people, we want them to reinvest those profits into the UK," he said. "And that is what a successful economy requires."

(Reporting by James Davey and Elizabeth Piper, additional reporting by Alistair Smout; Editing by Kate Holton and Kevin Liffey)