Jobs could be at risk because of a new deal on agency workers, Birmingham Chamber of Commerce has warned.
And it suggested it would make it more difficult for firms to survive through the credit crunch. BCI said the announcement that agency workers would be given the same employment rights as permanent staff after 12 weeks – under proposals agreed between the Government and unions – would lead to "a reduction in employment opportunities".
Kiran Virk, policy adviser at the Chamber, said: "Results from the Chamber's first Quarterly Economic Survey of 2008 showed that 15 per cent of members are seeking to recruit staff for temporary positions – the highest since the third quarter of 2005.
"This suggests that Birmingham's employers are reacting to the credit crunch and recessionary concerns by turning to a more flexible workforce with temporary and contract work providing the necessary flexibility that a competitive economy requires.
"The assumption that temporary workers are systematically exploited and underpaid does not reflect the reality for the majority of businesses.
"This announcement is likely to reduce the employment opportunities that agency work offers for both businesses and those individuals who choose to work through an agency."
More than a million agency workers nationally are affected.
The Government said it believed the deal could pave the way to reach an agreement in Europe on a new agency workers directive.
Business Secretary John Hutton said: "This is the right deal for Britain. The agreement achieves our twin objectives of flexibility for British employers and fairness for workers.
"It will give people a fair deal at work without putting their jobs at risk or cutting off a valuable route into employment."
The deal will end a deadlocked row between unions and the Government.
TUC General Secretary Brendan Barber said: "The issue of agency workers has been crying out for attention for far too long. Too many agency workers in the UK face unfair treatment and injustice.
"The agreement now opens the door to the much stronger legal protection that agency workers deserve."
John Cridland, deputy director general of the CBI, said: "Agency work is good for temps and for the firms that use them, and forms a central plank of the flexible labour market that is so important to our country’s prosperity.
"There has been a major risk of damaging legislation coming from Brussels, and the CBI has judged that the Government’s proposals represent the least worst outcome available for British business.
"Half of agency assignments will be unaffected as they last less than 12 weeks – protecting businesses’ ability to deal with peaks and troughs in demand and shorter-term staff absences, and while pay is covered, occupational benefits that recognise the long-term relationship permanent staff have with an employer, like sick pay and pensions, are rightly excluded."
But Tina Sommer, the Federation of Small Businesses’ EU and International Affairs chairman, said: "This is a disastrous deal for small businesses, which rely on the flexibility provided by agency workers. If that flexibility is lost, many small businesses will stop using temporary employees."
And David Frost, director general of the British Chambers of Commerce, said: "This is a bad deal for the country and a bad deal for business.
"When the economy is weakening this is not the time to further reduce flexibility."
Martin Temple, chairman of the Engineering Employers Federation said: "This is a bad day for business and represents yet another brick in the wall of labour market rigidity in the UK."