An
increasingly inflexible labour market and significant skills shortages are
damaging the UK’s competitiveness, according to a CBI report.
The
report, the first of a series of CBI studies assessing the UK as a place to do
business, compares UK labour market flexibility with the US, Germany, France,
Spain and The Netherlands.
It
claims competitor countries are closing the gap with the UK, which has the most
flexible labour market in the EU and the lowest unemployment.
The
study states that a ‘relentless build up’ of employment regulation is eroding
strengths such as freedoms to change work patterns and workforce numbers.
It
warns that key competitors like France and Germany are removing layers of
labour regulation while the UK has moved in the opposite direction.
The
report finds that weaknesses – such as
"appallingly low" levels of basic skills – are improving too slowly
and may take decades to resolve.
The
CBI study also reveals more than half of the firms that have moved or are
considering moving abroad report that labour costs are the most important
factor.
The
CBI believes this "inevitable" trend makes other forms of flexibility
more imperative as UK firms cannot compete on low wages.
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."
