The Engineering Employers Federation (EEF) has welcomed the government's announcement to review the employers' liability insurance market.
However, the EEF said the review should also have considered early measures to support firms facing huge rises in premium costs.
Gary Booton, Head of Health and Safety at the EEF said: "The current system of workplace compensation is unsustainable, and recognition of the need to join up on policy across government departments is a strong step forward. We believe there is a clear cut case for reform.
"Working closely with business and the insurance industry, government must tackle the long term fundamentals. However, in the short term there is much that government can and should do to relieve the massive pressure on premium inflation.
"We believe the government's £300m insurance premium tax windfall should be recycled, either to fund health and safety management programmes in small firms in the hardest hit sectors, or remove some uncertainty by using the money as a reinsurance fund to cover remoter health risks."
