The government stands accused of doing a U-turn by backing the EU Agency Workers Directive, which, if passed, would give equal pay and employment rights to temps.

Ministers and top officials have assured unions at Labour’s National Policy Forum that it will try to reach an agreement on the legislation with the European Commission.

Recruiter understands that the government is likely to abandon its campaign for a one-year derogation period before the directive applies.

This is despite protests from business leaders who argue that the legislation, which will make equal pay apply after six weeks, could cost the UK up to 160,000 jobs a year.

The Policy Forum agreement said: “We support the principle of the Agency Workers Directive and will engage with the European Commission with a view to reaching an early agreement.”

The Transport and General Workers Union believes ministers will drop their objections, despite public denials by the government that its position has changed.

Ann Swain, chief executive of the ATSCo, the IT recruitment trade body, said: “If this is true, then British business is being used as a sacrificial lamb to appease the unions for the sake of winning the government their support.

“It would be very disappointing if the UK government were to destroy its reputation in the business community in exchange for election funding.”

Gareth Osborne, managing director of the recruitment trade body the REC, said: “As it stands the directive would cause tremendous damage to the recruitment industry and we will aggressively lobby against it to ensure it is not detrimental to the UK labour market or jobseekers’ opportunities to find work”.