British businesses are raising concerns over the Labour government's proposed worker protections, fearing they could make hiring riskier, according to a report from the Confederation of British Industry (CBI).

The newly elected Labour government, which won a landslide victory in July, is moving forward with plans to introduce stronger employee protections, including parental leave, guaranteed minimum hours, sick pay, and safeguards against unfair dismissal.

Under current UK employment laws, workers can be dismissed without cause within the first two years of employment. Labour's planned reforms, however, would provide new hires with additional protections, a move that has caused unease among business owners.

The CBI’s annual survey, conducted in partnership with recruitment agency Pertemps, revealed that smaller businesses are particularly worried that these changes will make it harder to dismiss underperforming staff.

Matthew Percival, the CBI’s work and skills director, highlighted that 75% of businesses surveyed said they would be more cautious about hiring new staff due to the fear of facing employment tribunals over dismissal decisions at the end of probation periods.

"While the government has said businesses can use probation periods, the risk of challenges in employment tribunals has many employers concerned," Percival stated.

The survey, which included 152 companies, two-thirds of which are small to medium-sized businesses, also revealed wider apprehension about the UK's future business environment.

Around 62% of employers expect Britain to become a worse place for investment over the next five years, a figure that has risen by six percentage points since last year.

Employment regulation remains a concern for 39% of employers, but a notable 58% predict it will become an even bigger issue in the coming years.

The Labour government, however, is focused on improving labour force participation, aiming to raise it to 80% of the working-age population from the current 78.1%, which remains below the pre-pandemic peak of 79.5%.

Despite a low unemployment rate of 4.1%, businesses remain cautious about how these new measures will impact the hiring landscape and overall economic growth.