The human resources industry in the United Kingdom has grown so large that it is now almost twice the size of the equivalent sector in the European Union and 60 per cent larger than in the United States, a new report from the centre-right think tank Policy Exchange claims. According to Times UK, the expansion of HR roles, combined with a focus on radical equality, diversity, and inclusion (EDI) policies, is costing businesses billions of pounds annually and undermining competitiveness.
The 88-page report argues that while EDI initiatives are well-intentioned, they often fail to address the challenges they are meant to solve. Instead, they impose “significant costs” on companies, reduce productivity, and create internal divisions. Policy Exchange estimates that the misallocation of labour caused by an oversized HR industry costs the British economy roughly £10 billion a year compared with if the UK’s HR sector mirrored the proportional size of its US counterpart.
Between 2011 and 2023, the number of HR professionals in the UK increased by 83 per cent, far outpacing the 13.5 per cent growth in the wider workforce. Currently, 1.6 per cent of all UK employees work in HR roles, compared with just 1 per cent in the US and 0.8 per cent in the EU. Only the Netherlands, at nearly 1.8 per cent, has a larger share of HR staff. The report suggests this rapid expansion has fueled bureaucratic processes that divert attention from business priorities and growth.
Andrew Griffith, the shadow business secretary, told Times UK that the report highlights a pressing need to “correct the balance between regulation and corporate autonomy on EDI.” He warned that excessive rules encourage businesses to be risk-averse, slow to hire, and preoccupied with ticking bureaucratic boxes rather than delivering for customers. “The primary beneficiaries have been bloating non-jobs in HR or corporate responsibility departments,” Griffith added.
Policy Exchange recommends a range of reforms aimed at reducing the administrative burden imposed by EDI regulations. Among these is repealing the “positive action” provisions in the Equality Act, which allow internships and other opportunities to be restricted to specific minority groups. The think tank also urges the government to stop considering a company’s EDI policies when selecting suppliers and to avoid funding or supporting initiatives that promote EDI in the private sector. The report stresses that hiring decisions should be left to individual businesses, subject only to existing non-discrimination laws.
The report also calls for revisions to the legal interpretation of “equal work” in pay disputes, citing the high-profile equal pay lawsuit against Asda. In that case, shop floor employees, predominantly women, are suing the supermarket for over £1 billion, claiming they are paid less than warehouse workers, who are mainly men. Policy Exchange argues that courts should clarify the distinction between different job roles in equal pay cases to reduce costly and disruptive litigation.
Zachary Marsh, a research fellow at Policy Exchange and co-author of the report, told Times UK that the government must “start by getting its own house in order” by scrapping burdensome guidance that has created a “mass of shadow regulation” for companies. Baroness Cash, former commissioner at the Equality and Human Rights Commission, echoed the call for reform, saying that EDI legislation should be overhauled to “curb the worst excesses of this burden and free up businesses to deliver growth.”
The UK government, however, rejected the report’s findings. A spokesperson said the figures were unrecognised and emphasized that equality and economic growth are mutually reinforcing. They highlighted existing and upcoming measures such as mandatory pay gap reporting, including for ethnicity and disability, and employer action plans aimed at closing gaps and better harnessing the skills of women in the workforce.
Policy Exchange’s report comes amid growing scrutiny of the cost-effectiveness of corporate diversity policies and the role of HR departments in driving business outcomes. Critics argue that while the goals of EDI are laudable, the proliferation of administrative roles and overly prescriptive targets may be counterproductive. Proponents, however, stress that structured approaches to equality and inclusion are vital to creating fairer workplaces and addressing historic inequalities.
Times UK notes that the debate over the size and influence of HR departments in the UK is likely to intensify as policymakers, business leaders, and think tanks weigh the trade-offs between regulatory oversight and corporate autonomy. What is clear from the report is that the current scale of the HR sector, combined with rigorous compliance requirements, is having a measurable impact on corporate efficiency and the nation’s economic output.
Whether the government will act on Policy Exchange’s recommendations remains uncertain, but the report frames a stark challenge for UK business: balancing fairness and inclusion with profitability, growth, and streamlined operations. For now, the message to British companies is unmistakable—an oversized HR function may no longer be just a cost center, but a significant drag on the bottom line.
