A revamped DTI, possibly headed by current e-commerce minister Patricia Hewitt, could be willing to change controversial regulations in the draft Employment Agencies Act.

If Labour returns to government, parliamentary sources indicate that Hewitt, or Lord Macdonald, will take over from Stephen Byers at the DTI, following a Cabinet reshuffle. The DTI might then reconsider its position on quarantine periods for temp-to-temp and temp-to-third party fees.

Tony Blair1s decision to call a general election in June has also bought time for recruitment industry lobby groups to bargain for changes to the regulations.

Because parliament has now been prorogued, the DTI will not be able to work on the legislation until after the election.

The regulations set quarantine periods of up to eight weeks for temp-to-perm fees, but maximum quarantine periods of only four weeks for temp-to-temp and temp-to-third party fees.

Vic Patterson, the civil servant in charge of implementing the regulations, has already met with IT recruiter Spring to discuss the regulations and their impact on the recruitment industry.

An industry source said: ŒPatterson spent hours with Spring looking at how the IT industry works; and I feel confident he will take this into account when he makes the regulations.

'I think the DTI wants to come up with something that meets the recruitment industry's targets rather than damaging it - I am confident that we can move forward to a positive outcome.'

Belinda Brooke, head of legal policy at the REC, said: 'I would be pleased if the government was reconsidering its position, because many contracts would be affected by the limitation periods on the table at the moment.'

John Mortimer, chief executive of Angela Mortimer, commented: 'This vindicates those people in the industry who were not prepared to accept the fudge compromise that was previously negotiated.'

Adrian Marlowe, MD of law consultancy Lawspeed, has been involved with the consultation on behalf of 62 recruitment companies, and has called for quarantine periods of between eight weeks and six months. He said: 'There is nothing to fear from these regulations if the changes are made that we are pushing for.' Marlowe added that he believed the DTI would consider changing other areas of the Act.

A DTI spokesperson said he was unable to comment on the matter until after the general election.