Despite furious last-minute telephone lobbying by ministers, Labour Euro MPs defied the Government by helping to push through legislation that would make it illegal for employees to work more than 48 hours a week even if they wanted to, potentially affecting two million British workers.

Gerry Sutcliffe, the Employment Minister, said: “We are very disappointed that they have taken this decision. We think it is fundamental. We don’t want to have the high levels of unemployment there is elsewhere in Europe.”

While unions declared it a “victory for common sense” that would help to protect family life and curb Britain’s long hours culture, business organisations insisted it would be a “hammer blow” to the economy and make it difficult to compete in the global marketplace.

Britain is the only country in the EU to give all workers the right to opt out of the 1993 Working Time Directive, which makes it illegal to work more than 48 hours a week averaged over a four-month period. However, the reforms passed by 345 votes to 264 by the European Parliament would scrap the opt-out, secured by John Major’s Government, meaning that employees could not work more than the 48-hour limit, even if they and their employer agreed to it.

The reforms must now be approved by member states but since Britain does not have a national veto it will have to accept the ruling if it is not supported by enough other countries to block the legislation.

In a blow to the Government’s credibility with business, every Labour MEP voted to scrap the opt-out, joining forces with European Socialists, Greens and Communists. Gary Titley, the Labour leader in Europe, said: “We are voting for legislation that is based on health and safety issues and will bring work-life balance to families in the UK.” In an unusual twist, Conservatives and Liberal Democrats supported the Government, insisting that people should have the freedom to decide how long they work and that Brussels should not meddle in policies better left to national governments.

Philip Bushill-Mathews, the Conservative employment spokesman, said: “I don’t accept that it should be up to Brussels to determine how many hours people should or shouldn’t work.”

Chris Jones, the leader of the Liberal Democrats in Europe, said: “If the people of one country want greater social protection at the risk of damaging their competitive position then they should vote for a government that will introduce it.” The decision outraged Britain’s business groups. The British Chambers of Commerce said it was “a blow for business and for Europe’s future prosperity”.

Sir Digby Jones, the director-general of the Confederation of British Industry, said: “The vote shows the European Parliament has learnt nothing about the challenge of globalisation. Presumably these are the same MEPs who will be complaining about employers relocating to China and India in the years to come.”

The Institute of Directors claims that 40 per cent of British firms have used the opt-out, with 85 per cent of construction and transport firms saying losing it would make management more difficult.

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