Britain’s human resources sector has grown disproportionately large and is costing businesses billions of pounds a year, according to a new report from the think tank Policy Exchange.
The centre-right research body claims that the UK’s HR industry is almost twice as large, proportionally, as that of the European Union and around 60 per cent bigger than in the United States. It estimates that this “misallocation of labour” is costing the economy roughly £10bn annually compared with a scenario in which the sector matched US proportions.
Between 2011 and 2023, the number of people working in HR roles in the UK rose by 83 per cent, far outpacing the 13.5 per cent growth in the overall workforce during the same period. Policy Exchange calculates that 1.6 per cent of UK workers are now employed in HR functions, compared with 1 per cent in the US and 0.8 per cent across the EU.
The report argues that the expansion has been driven in part by equality, diversity and inclusion (EDI) requirements, which it says have created a “shadow regulatory” environment. While acknowledging that such policies are often well intentioned, the authors contend that they impose significant compliance costs and may reduce productivity.
Andrew Griffith, the shadow business secretary, said the findings pointed to a need to rebalance regulation and corporate autonomy. He argued that excessive bureaucracy made firms more risk-averse and diverted focus away from core commercial priorities.
Policy Exchange recommends repealing certain “positive action” provisions within the Equality Act 2010 that allow employers to take targeted measures to address underrepresentation. It also suggests government departments should not consider EDI policies when awarding contracts and should refrain from promoting diversity initiatives in the private sector.
Among other proposals, the think tank calls for a revision of the legal definition of “equal work” to limit equivalence claims across different roles. It cites ongoing litigation involving Asda, where shop floor workers are seeking parity with warehouse staff in a case potentially worth more than £1bn.
Baroness Cash, a former commissioner at the Equality and Human Rights Commission, said reform was needed to reduce burdens on business.
The government rejected the report’s conclusions. A spokesperson said it did not recognise the figures cited and insisted that equality and economic growth were complementary. Ministers remain committed to introducing mandatory ethnicity and disability pay gap reporting and requiring employers to publish action plans alongside gender pay gap data under the Employment Rights Act.
The debate reflects broader tensions between calls for deregulation to spur growth and arguments that inclusive workplace policies strengthen long-term economic performance.
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‘Bloated’ HR sector costing UK economy £10bn a year, claims Policy Exchange