Labour’s planned reforms to employment rights pose a “highly damaging” threat to business investment and recruitment, according to Rupert Soames, president of the Confederation of British Industry (CBI) and chairman of medical technology firm Smith & Nephew.

His comments follow government amendments to the Employment Rights Bill this week, which include boosting statutory sick pay and extending zero-hours contract measures to agency workers.

Ministers argue the legislation will drive productivity and economic growth, and it has received backing from some prominent leaders, including the bosses of Centrica and Richer Sounds. However, the CBI – one of Britain’s largest business lobby groups – and others such as the British Chambers of Commerce, British Retail Consortium, UKHospitality and the Institute of Directors have voiced serious reservations.

Soames says the new rules will cost companies an extra £5 billion, encouraging them to scale back on both hiring and capital investment. He also points to existing burdens on employers, including rises in National Insurance and the National Living Wage, as well as higher business rates and steeper taxes on intergenerational transfers of business assets, which cumulatively undermine growth.

While acknowledging a minority of bad employers in the marketplace, Soames argues that penalising “the 99 per cent” to catch the few is counterproductive. He highlights “fire and rehire” as a practice used by fewer than 1 per cent of companies, yet the government plans measures that would add “vast additional complexity” for all.

A recent study by the Chartered Institute of Personnel and Development found that four out of five employers expect their overall costs to increase under the new framework. The CBI insists that, unless there is a “course correction” before royal assent, the reforms will run counter to the government’s stated ambition to boost UK competitiveness, warning that businesses, not unions, create the majority of jobs.

Soames emphasises the CBI’s willingness to collaborate on adjustments that tackle workplace abuses without imposing blanket red tape. Without such changes, he warns, Britain may see fewer job offers and lower investment at a time when policymakers are striving for economic growth.