The compensation culture is imposing a growing burden on British industry, says a report by the CBI.

It calls for urgent reform of the business insurance sector.

Publishing its submission to the Government's review on business insurance, the CBI said UK firms had to absorb a rise in premiums of almost 50% last year.

The employers' organisation blames a rise in the number of compensation claims but says it is also a result of falling equity markets, an increase in the range of industrial disease and a rise in damages being awarded by the courts.

It is calling for measures to restrain the "have-a-go" mentality of compensation claims and introduce a pre-trial arbitration procedure, as well as urging Gordon Brown to pass on some of the windfall the Treasury has received from the rise in insurance tax revenue.

Digby Jones, Director-General of the CBI, said: "The unsustainable rise in insurance premiums is happening at the worst possible moment for many in business.

"One of the biggest issues is that people are more aware of their rights and more willing to take legal action. This is not in itself a bad thing but it makes it even more important to stop abuses of the system."

By law, companies have to take out insurance so workers can get compensation for work-related injuries caused by employer negligence.