Former defence secretary Liam Fox has said employment law needs to be changed to make it easier for companies to fire people.

Writing in the Daily Telegraph on Friday, Fox said the UK economy was in desperate need of growth in order to generate increased revenues.

"Too much recent debate has focused on tax and spend rather than on supply-side reform," he said.

"This is particularly true in the area of labour market regulation.

"Talk to small businesses and they will tell you that they are afraid to take on workers because if they try to fire anyone, even if the employee is unsuitable for the job, they are likely to find themselves in an industrial tribunal, with their lawyers recommending settlement."

Fox, who resigned from the cabinet last year over allegations he allowed his close friend too much access to the Ministry of Defence, said deficit reduction without labour market reform was like "driving with the handbrake on".

In a stinging attack on his former coalition colleagues, he said: "Resistance to deregulation largely came from the Liberal Democrats.

"Two things need to be pointed out to them. First, that they make up only one sixth – not one half – of the Coalition and must expect that Conservative economic ideas will be dominant.

"Second, that if the economy does not improve, they can expect a very unhappy date in 2015 with the voters, and their antipathy to labour market reform makes this more likely."

Fox has been relatively quiet since he returned to the backbenches, but he is a leading right-winger in the party and Friday's intervention may signal he intends to speak out more in the future as he attempts to rehabilitate his political career.