LONDON (Reuters) - The Confederation of British Industry lobbying group called on Monday for action to prepare Britain's labour market for austerity measures, including more flexible working hours and tougher rules on strike ballots

Britain's economic recovery after its worst recession since World War Two is still fragile, and on Tuesday Chancellor George Osborne will unveil an emergency budget expected to contain tough measures to tackle a record budget deficit.

In a new report titled "Making Britain the Place to Work," the Confederation of British Industry (CBI) also urged the government to introduce a "sustainable employment test" for future employment laws to ensure they help create new jobs.

Britain's budget deficit is at about 11 percent of national output, threatening its AAA credit rating, which could push up the country's cost of borrowing if the deficit is not tackled soon, the government says.

Still, spending cuts are likely to stoke public unrest and union activity given that public sector job losses are expected. British Airways, telecoms provider BT, and rail firms have all been battling unions in recent months.

The CBI wants a change to balloting rules to allow strikes to go ahead only if 40 percent of the balloted workforce support it, not only a simple majority among those who actually vote.

"Strikes cause misery. They prevent ordinary people going about their daily lives, whether it's getting to work or getting the kids to school ... Strikes also cost the economy dearly and undermine our efforts to help rebuild the economy," CBI Deputy Director-General John Cridland said in a statement.

The group also wants the right for flexible working time to be extended to all employees, and to shorten the consultation period for collective redundancies to 30 days from 90 days.

It says the moves will allow firms to take swift action in response to changes in demand, safeguarding business and job prospects in the long term.

(Writing by Mohammed Abbas: Editing by Ron Askew)