As the economic climate continues to challenge organisations, business leaders in tech are being forced to make difficult decisions about where to direct their resources. For some, diversity, equity and inclusion (DEI) efforts might seem like a soft target for budget cuts. But in reality, dialling down investment in inclusion could expose companies to significant risks. In this guest post, solicitors Kerry Russell and Rhys Wyborn from Shakespeare Martineau explain why now is precisely the moment when tech organisations need to double down, not scale back.

With employment law tightening and claims on the rise, companies that fail to prioritise inclusion are leaving themselves open to serious consequences.

“Right now, the employment tribunal system is overwhelmed and a significant number of those claims are discrimination-based,” warns employment partner Rhys Wyborn.

“There are nine protected characteristics under The Equality Act, and multiple routes to bring a claim.”

One particularly high-profile area of litigation that’s grown recently involves gender critical beliefs.

Rhys explains: “These cases are working their way up to the highest courts. The UK Supreme Court recently addressing the meaning of ‘sex’ and ‘woman’ under the Equality Act and finding that this refers to biological sex and a biological woman shows how live and complex these issues are.”

He also warns that while the UK’s legal framework is already robust, it’s tightening even further.

“Next year, under the reforms Labour are proposing, the bar will be raised again when it comes to sexual harassment in the workplace,” he says.

“Employers will be required to take all reasonable steps – not just some – to prevent it, and there will also be a reintroduction of liability for third-party harassment.

“That means if someone external, like a client or supplier, harasses your staff, your business could be held accountable.”

The cost of non-compliance is rising

And the consequences for failing to meet these legal duties? Substantial.

“Unlike unfair dismissal claims, compensation for discrimination is uncapped,” Rhys explains.

“If an employee loses their career as a result, you could be looking at six or even seven-figure sums. On top of that, there are additional awards for injury to feelings.”

New laws introduced in late 2024 mean that if an employer fails to prevent sexual harassment, a 25% uplift in compensation can be added.

“That’s a big penalty for not doing enough,” says Rhys. “And these cases attract media attention. Tribunal hearings are public. If your company name ends up in a discrimination headline, the reputational damage can be as painful as the financial cost.”

US backlash

While UK legislation is independent of American law, the cultural influence from the US, especially around DEI, is increasingly felt on British soil.

“There’s been a lot of pushbacks on inclusion efforts in the US, particularly in corporate settings,” Rhys says.

“But the response here from the government has been to double down. We’re seeing more enforcement, not less.”

Why inclusion still matters

While the legal argument is compelling, there’s also a strong ethical and business case for continuing to invest in DEI, especially during difficult times.

“To get the best candidates in a competitive market, you need to make sure you’re picking people based on talent, not bias,” says Kerry Russell, intellectual property partner and founder of Shakespeare Martineau’s employee-led inclusion network, More in Common.

Launched in 2017, More in Common is a network designed to encourage an open, supportive environment and help employees feel they can bring their whole selves to work.

Kerry says the initiative has become a vital part of their culture: “It started small, but now it’s grown into something self-sustaining.

“We’ve got groups for many communities and people, spanning many topics, including LGBTQ+, parents, menopause, Muslim, Sikhs, neurodiversity and other disabilities. It’s become a really valued part of who we are as a business.”

And the benefits are far reaching. Shakespeare Martineau’s most recent internal anonymous pulse survey returned its highest ever score – 8.52 out of 10 – for those who agreed they can be themselves at work.

“For us, that’s not just a statistic – that’s culture in action,” says Kerry.

“When people feel they can be authentic, they’re more engaged, more productive and more collaborative. It creates space for creativity and better ideas, which is important in any business.”

There’s also hard data to back this up.

According to McKinsey’s 2023 “Diversity Matters Even More” report, companies in the top quartile for gender diversity on executive teams were 39% more likely to outperform on profitability, while those in the top quartile for ethnic and cultural diversity were 36% more likely to outperform their peers.

“This isn’t about ticking boxes,” Kerry adds. “It’s about building stronger, smarter, more sustainable businesses.”

Younger generations expect more

There’s also a shift in employee expectations. “Younger people care deeply about working somewhere inclusive, even if they don’t have a protected characteristic,” says Kerry.

“It’s not just about compliance for them, it’s about values. They want to work for companies that reflect what they believe in.”

That shift is backed by research: according to the Fashion Diversity, Equality and Inclusion (DEI) report, 39% of job seekers have turned down a job because it lacked an inclusive culture.

And, according to Glassdoor, 76% of employees say a diverse workplace is an important factor when evaluating companies and job offers.

However, Kerry also points to a new kind of challenge – the fear of getting it wrong.

“Sometimes people are scared to talk about inclusion in case they say the wrong thing,” she says.

“But that fear can lead to silence and that’s not the answer. We need to build psychologically safe environments where people can learn, ask questions and get better.”

Small steps, big impact

Not every business has the budget to launch a fully resourced DEI department, but that doesn’t mean they can’t make meaningful progress.

“The way we started More in Common was really low cost,” Kerry explains.

“We got a small group of people together who were passionate about inclusion. We gave it a name and an identity so people could rally around it.”

From there, it grew organically.

“You don’t have to spend much,” she adds. “Start by recognising cultural or religious events. Use freely available resources like TED Talks or articles. The key is to educate and celebrate, and to keep it visible.”

Rhys agrees: “Having policies in place is the first step but they’re not worth much if no one knows about them or they’re collecting dust on a shelf.

“Train your people. Remind them regularly of your values and expectations. Make inclusion part of your culture, not just your compliance checklist.”

The bottom line

The legal risks of ignoring or under-resourcing DEI are growing, and they’re not going away. Between rising tribunal claims, stricter laws, cultural pressures and employee expectations, inclusion isn’t just a moral imperative – it’s a strategic necessity.

Companies that deprioritise inclusion risk falling behind – in the talent market, in innovation and in legal compliance.

But those who invest stand to gain a more engaged, more creative and ultimately more resilient workforce.

As Rhys puts it: “Employers can’t afford to wait. The bar is rising and those who don’t keep up will pay the price.”

Shakespeare Martineau is an Associate Sponsor of Sheffield Digital and full service law firm, with offices in Sheffield and throughout the UK. To find out more about their services, visit the website: www.shma.co.uk. Kerry Russell, who co-authored this post also delivers free legal drop-in sessions at Sheffield Technology Parks. If you are a startup, micro or small company member of Sheffield Digital, you can access these sessions. Find out how, here.