Plans to reform data protection laws in Europe "will restrict and burden businesses and threaten innovation", business lobbying organisation the CBI has said.

The reform of the 1995 Data Protection Directive is one of biggest shake-ups of data protection laws in the European Union in nearly 20 years, affecting thousands of large companies.

In its submission to the Ministry of Justice's "call for evidence" on the European Commission's data protection proposals, the CBI said the proposed regulation will "threaten many innovative business models which rely on data sharing to generate revenue".

Compliance will also place a cost burden on all businesses which may deter investment and be passed on to consumers, the CBI claimed.

The CBI is calling on the European Commission to revise its proposals in favour of a "proportionate, risk-based approach", taking into account the benefits versus costs of any changes to data protection.

Matthew Fell, CBI director for competitive markets, said: "We're concerned that the EC's proposed data protection reforms will put European businesses at a competitive disadvantage in a global market, by placing restrictive controls and high cost-burdens on innovation and investment."

Fell said "novel" business models relying on data-sharing to generate revenue and to offer individually-tailored users experiences could be affected. He added that innovation through partnerships with social networking sites could be threatened.

The CBI also believes the European Commission has overlooked data compliance costs as a result of any changes, including changing IT systems, re-training staff, and re-issuing customer terms and conditions.

Equipping a call centre to handle issues arising from the changes could cost around £100,000, it claims.