Companies with 50 staff or more could be at risk of legal action from staff made redundant in the slowdown as a result of a new European directive requiring firms to consult ahead of any layoffs, which takes effect this weekend (6 April).

On Sunday, the UK will extend to all businesses with over 50 staff provisions of a European directive giving employees the right to be consulted on major changes, including plans for 20 or more redundancies. Employers failing to do this may face claims at industrial tribunal from one or more employees - potentially in a class action brought by a union. The tribunal can make "protective awards" against the employer equivalent to three months' salary.

"Many smaller companies which previously had thought themselves beyond the scope of these requirements will now be pulled into the net," said Helga Breen, employment partner at the business law firm LG.

"Importantly, although 20 redundancies is a lot for a smaller firm there is no minimum number for protective awards where a company transfers or contracts out a particular activity, and the new provisions cover changes in every aspect of the business - which might not only include job losses, but also changes to the pension or even health and safety issues."