DEI in the US: will it impact the UK?

I spoke to Jonathan Mansfield, Employment Partner at Spencer West LLP, who explained how DEI initiatives in the US have come under intense scrutiny, with legislative changes prompting businesses to reassess their DEI commitments. A example of which comes from Google’s parent company, Alphabet, which removed a long-standing DEI commitment from its annual report.

Mansfield said: “It has been striking how quickly several big names such as Google have reacted. For example, their parent company, Alphabet, has removed the following aspiration from its annual report: ‘…to making diversity, equity, and inclusion part of everything we do and to growing a workforce that is representative of the users we serve.’”

One of the biggest changes causing uncertainty in the US is the repeal of Executive Order 11246, which required federal contractors to implement affirmative action to prevent discrimination and promote diversity in their hiring and employment practices. Mansfield commented that this order had previously helped recover $12.1 million in 2024 alone from businesses found to have engaged in race- or gender-based hiring and pay discrimination.

“With the threat of enforcement action gone, and short-term savings which might be made from ensuring compliance, diversity promotion is likely to go backwards,” Mansfield said. He added that federal agencies are now actively scrutinising private sector DEI policies, creating a “chilling effect on businesses with a pro-DEI agenda.”

Commenting on the impact, Lissele Pratt, Co-Founder and Chief Growth Officer at Capitalixe, said: “Trump’s DEI cuts are a disaster. In just two weeks, he’s wiped out years of progress. He’s gutted diversity initiatives, fired DEI staff, and made it harder for companies to prioritise inclusion. The message is clear. If you’re not part of the ‘old boys’ club, you’re on your own. Big companies like Accenture, Citigroup, and Disney are already rolling back their commitments. This shows just how fragile their so-called values really were.”

The UK sees a more stable commitment

Despite changes in the US, the UK maintains a firm stance on DEI, said Mansfield, citing that a survey by Occupational Health Assessment Ltd found that 53% of UK employers continue to support DEI, with 22% actively strengthening initiatives. Mansfield also highlighted that while 69% of employers acknowledged that US policy shifts could have some influence, there is little evidence of a major change in direction. “Commitment to DEI is strongly embedded in the UK. Without the external political pressure, a seismic change of direction is unlikely on this side of the pond,” he said.

Mansfield explained that whilst UK employment law does not legally require companies to adopt DEI policies, various regulations do mandate proactive steps companies must comply with, such as gender pay gap reporting for organisations with 250 or more employees and measures against workplace harassment. Proposed expansions to these laws may extend pay gap reporting to include disability and ethnicity, alongside public equality action plans.

Pratt pointed out: “Thankfully, the UK isn’t following suit. Diversity here isn’t just a trend ... Time and time again, we’ve seen that diverse teams are good for business. Morgan Stanley found that companies with higher gender diversity outperform those with lower diversity. EY discovered that 63% of job applicants prioritise companies with strong DEI initiatives when choosing where to work. In their survey, McKinsey saw companies in the top quartile for gender diversity on boards are 27% more likely to outperform financially than those in the bottom quartile. Businesses that ignore DEI aren’t just making a moral mistake. They’re making a financial one.”

The link between diversity and success

Supporters of DEI argue that diverse businesses perform better, and there have been studies that have reinforced this perspective by showing a direct correlation between diversity and success. Mansfield said: “Continued support for DEI has two main bases: 1. The ‘what’s best for business’ argument. A 2023 BlackRock study showed that the most diverse businesses outperformed comparable less diverse businesses. A 2015 McKinsey study had also shown a correlation between performance and diversity. 2. The ‘political’ argument. The current UK Government has a strong commitment to DEI reflected in its legislative agenda seen in the Employment Rights Bill 2024 and with other proposed legislative initiatives.”

Employees and investors are also driving DEI efforts. Mansfield noted: “A 2002 DWP Employer Survey found that more employers (30%) considered that diversity improved company culture than those who thought it made no difference (20%). A 2024 survey of Millennials and Gen Z employees showed that three-quarters saw ESG (which has a DEI element) as an important factor when choosing an employer.”

The transatlantic divide

For UK businesses with US ties, balancing regulatory and cultural differences will be crucial. While US legal changes create risks for multinational companies, UK employment law remains firmly rooted in anti-discrimination principles. However, Mansfield advised UK companies to tread carefully: “UK companies with US links will need to obtain legal advice stateside in relation to their operation over there. At the same time, such UK companies will need to balance any adjustments made with compliance with the advance of equality legislation in British jurisdictions.”

Pratt warned that while UK businesses may not be rolling back DEI initiatives, they could still be influenced by US developments: “I do fear, however, that UK companies may start feeling pressure from US-based stakeholders. When big American businesses pull back on DEI, others might follow suit. Now is absolutely not the time to backtrack. The UK has a real opportunity to lead by example. Businesses here need to prove that diversity isn’t just the right thing to do. It’s the smart thing to do.”

While the UK’s pro-DEI stance appears secure for now political shifts could reshape the landscape, and if movements akin to those in the US gain traction, UK businesses may face new challenges in maintaining their diversity commitments. For now, however, UK employers continue to view DEI as an integral part of their strategy, backed by legislative frameworks and a belief in the business benefits of diverse workplaces.

L-R Jonathan Mansfield, Employment Partner, Spencer West LLP; Lissele Pratt, Co-Founder and Chief Growth Officer, Capitalixe