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Business experts have highlighted a series of employment laws they feel are limiting the economy’s chance of thriving in the UK, with the “outdated” Employment Tribunal system being the single biggest deterrent to firms looking to hire.

According to the Spring Employment Trends Survey by the CBI and recruitment specialists Harvey Nash, 67% of firms perceive employment regulation to be the biggest threat to labour market competitiveness.

In addition, nearly half of UK businesses surveyed have been affected by the introduction of the Agency Workers Directive in October 2011, and of these, 60% have reduced their dependency on agency workers, preferring to employ temporary workers on fixed-term contracts or other temp models.

"Employment law is now seen as a brake on competitiveness by two-thirds of firms, and 52% expect new rules from Brussels to prove damaging in the next five years,” said Katja Hall, CBI Chief Policy Director.

“Employment regulations themselves can be a barrier for firms, particularly smaller ones, but the number one issue for businesses is how the rules are applied in Tribunals. While reforming collective redundancy and TUPE rules will help, a real game-changer for growth would be a radical reform of Employment Tribunals.

With an ever-growing backlog of claims, the CBI believes changes to the Tribunal system are “essential”, and the government’s attempts to make progress on this front are being ”defeated by the inertia of an overly legalistic system”. “More radical reform has to come, to make the system quicker, cheaper, and more consistent for its users,” added Ms Hall.

"The CBI believes there is a case for taking Tribunals out of the court system and re-establishing them as more informal, swifter hearings, with judges ensuring cases are heard quickly and effectively.”

"Hiring plans are cautious, and pay awards in particular remain low as businesses look to make sure they stay competitive in tumultuous times. We have to accept this constraint as the new normal – we will only be able to afford to pay ourselves more in the long-term by improving productivity and competing more effectively around the world,” added CBI Director-General, John Cridland.

“Half of employers expect to have opportunities available for unemployed youngsters, but taking them on is not without its challenges. 49% identify a lack of skills and 37% a lack of aptitude as real barriers that need to be overcome."

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