from gov.uk:
>"If you think you’ve been given an unfair or misleading reference, you may be able to claim damages in court. Your previous employer must be able to back up the reference, such as by supplying examples of warning letters.
You must be able to show that:
- it’s misleading or inaccurate
-you ‘suffered a loss’ – for example, the withdrawal of a job offer"
which means, if the reference is not misleading and not inaccurate, a negative reference is ok. other uk-based law firms (from a quick google) agree with this interpretation.
in my comment, i was speaking more generally than i should have, and that (obviously, in hindsight) caused some confusion between the specific case of the hypothetical company, and the general case of an employer providing a negative reference. my bad -- and it is too late to edit to provide clarification.