Business groups have welcomed the draft reforms of the relation between the UK and the European Union presented by Prime Minister David Cameron. Downing Street hailed the reform proposals agreed by European Council president Donald Tusk, saying they can "deliver substantial change" to Britain's position in the EU.

Carolyn Fairbairn, director of the Confederation of British Industry (CBI) called the deal proposal an "important milestone" that could benefit both the EU and the UK. The CBI has long argued in favour of the UK remaining in the EU but has called for reforms of the UK's position.

"Business will want to see more details when the negotiations are concluded, but the Prime Minister's ambitions to create a more competitive and outward-looking EU are making clear progress," Fairbairn said.

"Business will also welcome proposals to strengthen national parliaments' control over regulation, she added. "The Single Market has been the foundation of our economic success in recent decades and firms will back the drive to improve if further, especially for digital and service industries."

The CBI boss was most upbeat about the proposal to cut red tape, especially for smaller businesses. The bureaucracy and excessive regulation that smaller firms face from the EU has long been a concern for businesses. Fairbairn said that the regulation proposals could make a "real difference to ambitious firms looking to grow and create jobs".

The majority of Institute of Directors (IoD) member companies 60% said cutting red tape was one of their top concerns. Simon Walker, the IoD's director said: "Cutting back on pointless bureaucracy which stifles companies must be one of the top aims of these negotiations, so we welcome the commitment to scale back EU interventions in areas which should be left up to individual countries."

"We were also pleased to see that the draft says the EU will put in place burden reduction targets for regulation where feasible," Walker added. The IoD said that the reform deal, which still needs to be approved by the European Council member states, was better than it expected.