Shoppers, investors and potential employees will be encouraged to boycott firms which pay men more than women, as part of the Government’s controversial new drive to improve workplace equality.

Speaking to the Birmingham Post at the launch of the Equalities Bill, Vera Baird, the Solicitor General, said measures to crack down on sex discrimination would help businesses succeed by getting the best work out of all their staff. But business leaders said the new laws would add to red tape on industry as they struggle to cope with the recession, as they held a major conference in Birmingham.

Speaking from the International Convention Centre, David Frost, director general of the British Chambers of Commerce, said: “This Bill will discourage job creation and make employers fearful of the recruitment process.

“We already know that half of small firms struggle to navigate employment law and this will just add to the problem.”

The British Chambers of Commerce represents chambers from across the country and held its Annual Business Convention at the ICC.

New laws will force all public bodies with more than 150 staff to reveal how much they pay male and female employees, and Ministers will ask businesses with 250 staff to do the same.

Although the measure will initially be voluntary for the private sector, the Bill gives Ministers the power to force private firms to comply if they fail to do so willingly.

Ms Baird said businesses could be asked to post their pay surveys on websites, as well as in reports to Companies House.

“The point is that you can’t get rid of the pay gap if you don’t know it’s there, but once you do know it’s there, and you can see that another company of the same kind down the road, has much less of a pay gap, then you can start to look at why there is one and put it right.

“Some of it will be discrimination, some of it will be historic accident – firms that have combined and never looked rigorously enough at where their pay scales have never merged properly - but if you don’t know, you can’t do anything about it.”

She added: “People now apply for jobs, buy goods, invest in shares on an ethical basis. That’s what this ought to do, it ought to move the issues of gender pay into that category.”

She rejected suggestions that the legislation, which will also outlaw gagging clauses which ban staff from telling each other how much they earn, would add to the burdens on industry.

“You don’t want somebody being taken – being trained, developing loyalty to you, forming relationships with customers – and finding they have unequal pay to somebody next to them and leaving because they feel they have been very badly treated.

“It’s good for business. Business works better if people aren’t being treated unfairly and held back – if they can use all their talents, all their skills.”