Small business groups have called on the government to hold its nerve after EU talks on the Working Time Directive broke up without agreement yesterday.

Both the Federation of Small Businesses and the CBI applauded Trade and Industry Secretary Alistair Darling for insisting the UK continues to opt-out from a compulsory 48-hour week.

Britain's has come under increasing scrutiny from other European countries who want the UK's exemption to be scrapped.

Finland called an extraordinary meeting of EU labour ministers after proposing strict conditions onto the UK opt-out, including a cap of 60 hours a week for employees choosing to work over 48 hours.

But the meeting ended in disagreement yesterday. Five member states - France, Spain, Italy, Greece and Cyprus - stated that they could not accept the proposals without a definitive end date for the opt-out.

C BI deputy director- general John Cridland said: "Those who have argued for the ending of the opt-out simply do not understand the realities of the modern workplace.

"The ability for individuals to opt out from the 48-hour working week is a vital part of the UK's flexible labour market.

It gives employees choice in the hours they work, letting them earn extra money for their families and giving companies the flexibility they need to deliver to customers and compete in a global economy.

"The Government deserves credit for standing firm and delivering on its pledge to maintain the opt-out. But this issue will come back to the table and when it does, the Government needs to continue to hold its nerve."

Mr Cridland's sentiments were echoed by Matthew Knowles of the FSB, who said that the current opt out was preferable to any of the EU proposals, which the FSB fear will add to the burden of small business red tape.

Mr Knowles said "The collapse of discussions today may be bad for relations between EU member states but for UK small businesses this is great news. The status quo is much better than either the Finnish proposals or the loss of the opt-out.

"Small business owners will be breathing a sigh of relief that the average 28 hours a month of form-filling they already have to do won't go any higher for the time being."

Nick Goulding, chief executive of the Forum of Private Business, said he hoped the Finnish presidency would not re-draft a new compromise imposing more burdens on business.

He said: "We hope that the current Finnish Presidency and the upcoming German one do not take this as a mandate to come up with a document imposing even more burdens. "This draft, although it contained some positive measures, was already unacceptable in the costs it would have imposed."

He added that the European Commission should now be considering whether there is any need to continue its efforts to remove the opt-out.

Earlier this week, union leaders stepped up calls for a limit on working hours, arguing it would have little impact on the UK economy.

The TUC said a new analysis of official figures showed that long working hours were on the decline.

It showed that the number of employees working more than 48 hours had fallen by 17.5 per cent since the 1998 peak of four million.

Around 700,000 fewer people were now working long hours, with the pattern of improvement seen in every industry.

One in three of those working more than 48 hours a week were only putting in one or two extra hours, according to the report.

But the TUC said ending the opt out would still make an important difference to a million workers who were putting in a long working week, threatening their health as well as home lives.

TUC general secretary Brendan Barber said: "Ministers tell us that keeping the opt out is essential to the UK's economic success, but these figures hole that argument below the waterline.

"The truth is that long hours working is already in decline - not fast enough for sure - but is still a marked trend, particularly in the private sector."