Comment: Time to wake up and address global realities
As an ever-increasing proportion of our political class is made up of professional politicians, with little or no substantive experience of business, it comes as no surprise that successive UK governments have failed to address what is needed to create a truly entrepreneurial society.
By Andrew R McErlain
Ministers continually espouse support for the ‘businesses of tomorrow’ and the vital role they will play in our economic recovery but, at the same time they seem unable to address the core issues that restrict the growth of virtually every small business in the UK.
It really is a simple question – what kind of business environment do we want to create? If we want to encourage dynamic young entrepreneurs to build successful enterprises then why is it that year after year we enact ever-increasing statutory protection of employees and, in the process, constantly increase both the cost of employment and its attendant bureaucracy?
Do we really want to create an employment environment in the UK which is a mirror of that existing in the EU? The whole thrust of employment statute emerging from the EU seems to be based on a perceived ambition to make employment fair and to protect 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 (unless Company A is generating value in the product reflective of the higher cost base) 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 albeit that his/her selection may make one of his 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 do no more than render ever increasing damage to our economy and the employment prospects of our young people.
The whole basis and approach of the EU 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 the EU. Young people who have invested years in education have effectively been betrayed by an older generation who, over the last 20 years, have engineered ever increasing employment protection for themselves without any real focus on the consequences.
So 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. Just look at the failure statistics if you don’t believe me; 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 they should in be dynamic. Exempt all new start-up companies (with under 10 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?
We can no-longer afford to enact ever increasing volumes of employment protection whilst consistently disregarding its cumulative impact on our global competitiveness. It is time for our politicians to conduct this debate with a candour and global perspective that has been sadly absent to date.
Andrew R McErlain is CEO of elitemarket.com
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