Legislation to end workplace discrimination against Muslims and homosexuals has been unveiled by the government.

Social exclusion minister Barbara Roche announced a raft of measures to improve the position of minorities in society, part of which seeks to address workplace homophobia and religious discrimination.

For the first time it will become illegal for employers to act prejudicially against Muslims, gay men and lesbians. Ministers are concerned about rising animosity towards Britain's Islamic community in the wake of the September 11 attacks.

The emergence of racially extremist political parties in the North and South West has raised concerns that Muslims may be victims of prejudice at work.

Discrimination against homosexual workers will also be targeted by the proposed legislation, in an attempt to bring British law into line with EU directives.

Roche said she still heard "about the way in which gay workers have been subjected to intimidating, hostile or degrading treatment at work".

Recent TUC research has indicated that almost half of gay workers had been discriminated against, with complaints ranging from abuse to death threats.

The minister said that legislation should make bigoted workers think again.

"Most [people] accept quite readily, now, that some people have a different sexual orientation to their own," she said.

Roche stressed that improving working conditions for minority workers could bring real economic benefits to employers.

The minister suggested that firms attracting the best candidates for jobs, whatever their sex or religion, could see net efficiency benefits of between £26 and £32 million a year.

Current case law prevents discrimination against Sikhs or Jews in the workplace but implementing proposed changes to extend the law to Muslims and homosexuals could cost British business up to £52 million.

Roche insisted that this was a price worth paying. "Social justice is one of the driving forces behind new legislation this week. But economic success provides just as powerful a rationale," she said.

"If we're to have a real debate about equality in Britain, it's essential to recognise one can't be separated from the other."