British companies should start proactively publishing their ethnic minority pay gap before being forced to by the Government, one of the country's biggest business groups has said.

The Confederation of British Industry (CBI), which first published its own pay stats based on ethnicity in April last year, has called on organisations with more than 250 employees to follow suit.

"Closing the UK's ethnicity pay gap is about making our society fairer and overcoming inequality at work," said Matthew Fell, the CBI's chief UK policy director.

Although the Government might take action on ethnic pay reporting, like it did on gender pay gaps, businesses should get ahead of the curve, the CBI said.

It said that racial equality in the UK labour market could boost the economy by £24 billion each year.

"Not only is it the right thing to do: the business case is watertight. Diverse companies are better companies," Mr Fell said.

He said that many companies are doing good work leading from the front and increasing the number of people they hire from ethnic minority backgrounds.

"But many companies have so much more they can and should be doing.

"Firms have to get better at speaking about race at work; developing campaigns to encourage employees to share their ethnicity; and creating strategies to improve BAME representation all the way up to the boardroom. "

The CBI also published a guide on how companies can report their ethnicity pay gap in a responsible way.

Law firm Eversheds Sutherland, which collaborated on writing the guide plans to publish its ethnicity pay gap for the first time this year.

Eversheds partner Naeema Choudry said: "Ethnicity pay gap reporting ... enables businesses to understand any ethnicity pay gaps that may exist and then to carefully consider what practical steps need to be taken to close them."

Only 178 out of 2,625 directors of FTSE 350 companies were from a BAME (Black, Asian and minority ethnic) background in January this year, according to figures provided by the CBI.

Meanwhile one in four BAME employees reported they have witnessed or experienced racist harassment or bullying from managers within the last two years.

The CBI's own 2018 ethnicity pay gap report shows that 12% of its employees are from BAME backgrounds, while 80% are white, and 8% did not disclose their ethnicity. The median pay gap for employees was 11%.

By August Graham