Small business groups have warned that the government's plans to increase flexible working to parents of older children - announced in the draft Queen's speech by Gordon Brown - could prove to be a nightmare for small businesses.

The news comes at a time when the EU is close to reaching agreement on the controversial Agency Workers Directive - backed by Gordon Brown - that would give temporary workers the same rate of pay, holiday and other benefits as permanent staff.

"For many entrepreneurs, losing more key members of staff for periods would be a nightmare," said the Forum of Private Business' media and PR manager Phil McCabe.

"Removing the incentive to employ temps on a part-time basis could leave many businesses with serious staffing problems."

Alan Tyrrell, employment chairman at the Federation of Small Businesses, echoed those views. "You can't have an extension of flexible working and at the same time clamp down on the means by which many small businesses cope with it, which is often through temporary workers," he said.