The Federation of Small Businesses (FSB) has said it has welcomed the government's move to clamp down on claim farming companies that mislead clients into making unrealistic or fraudulent claims from their employers.

The FSB said it is concerned that a compensation culture is damaging the work of small businesses, stifling innovation and increasing insurance costs.

It said therefore, that it welcomes the proposed legislation that seeks to address this problem.

Carol Undy, FSB chairman, said: "This should bring some balance to a situation which can greatly damage employment relations and the entrepreneurial efforts of small business, but at the same time protect the genuine claimant."