Blair soothes CBI fears

A PROMISING confrontation between big business and the government was defused by a bravura performance from Tony Blair at the CBI conference.

But tensions are building on all sorts of other issues - particularly on global trade where simmering rows could endanger the world's fragile economic recovery.

One clear message from the Birmingham gathering was that nearly all the major problems facing British business - Europe, public spending, regulation, trade and outsourcing to Asia - now have an added subtext of political wrangling.

In a frank question-and-answer session, a haggard-looking Blair defended his government's achievement of economic stability, but mused about the problems of powerful Whitehall departments and their 'self-generating' red tape.

He acknowledged that business was deeply unhappy about the poor state of transport, and that Brussels-driven initiatives are constantly raising the regulatory hurdles. His analysis pleased the CBI delegates. It is less clear what they thought of his solutions - more toll roads and more centralisation in Whitehall. He also advocated a further advance into Europe, but with 'red lines' drawn to defend against encroaching Brussels bureaucracy.

Though the euro was not mentioned, Blair said every Prime Minister's dilemma was whether to 'hang back and wait for the EU to move in a British direction' or - as he prefers - to get in there and try to shape it.

'The danger if you don't is that Europe moves on without you. I know this is an unpopular thing to say in certain quarters,' he added, appearing to acknowledge the imminent arrival at the CBI of Chancellor Gordon Brown.

Blair reaffirmed his support for a new European Constitution, and said: 'This is the moment to engage more deeply and press our case forcefully - not retire frightened from the field.' Or to write critical articles in the Daily Telegraph, he might have added, with an eye on today's speech from Brown, who appears in a double act with US Treasury Secretary John Snow. The approach of Snow did not save the US from criticism, though its economic acceleration is dragging the world into recovery mode.

Blair warned them bleakly on steel tariffs that world trade rules must be obeyed.

Director general Digby Jones said he knew of three US multinationals (two in the defence industry) with operations here that are being pressurised by US Congressmen to close down and return home with the implicit promise of generous inducements.

That put the pious words from Trade Secretary Patricia Hewitt and World Trade Organisation director Dr Panitchpakdi Supachai about restarting the Doha global trade talks in perspective. The talks will resume in Geneva next month, but clearly a good deal of protectionist manoeuvring is going on in the meantime.

Hewitt's appearance was overshadowed by the threat of an axe over 500 jobs at her department. She attempted to champion free trade, but landed in hot water by appearing to endorse the drift of jobs to India.

A pre-conference survey found that 43% of firms were under pressure to switch some jobs abroad.

That is the stark reality in the background of this very political conference with six cabinet ministers and Michael Howard speaking inside two days. While the politicians wrangle and Europe debates the outer limits of regulation, Asia is quietly snaffling the business.

That is the next dilemma for UK manufacturers, which have seen their workforce decline exorbitantly with 1.5m jobs going in two decades.

Questioned from the floor, Blair said bluntly that he could neither return to the failed industrial policies of the past, nor shield manufacturers from the world economy.

His government's big gift to industry has been economic stability. Now business is asking for more and it is far from clear that he can deliver.