Members of the European Parliament have approved new regulations that are intended to reduce the burden of red tape on small businesses.

The changes are intended to make such firms more competitive and UK Labour Party MEP Arlene McCarthy predicts it will assist them in their recovery from the recession.

Only those very small companies, dubbed micro-entities, will benefit from the new laws, with the average enterprise expected to save £1,000 per year in accountancy and audit fees as a result, potentially generating jobs within the European Union.

Ms McCarthy, who is vice-president of the Economic and Monetary Affairs Committee, stated: "We have made a commitment in the EU to reduce burdens on business by 25 per cent by 2012 and this law is an important step towards meeting that goal."

EU ministers also recently agreed to new regulations that will extend statutory parental leave for both mothers and fathers to a minimum of four months each.