Brown's new drive to woo CBI

GORDON Brown threw business a carrot on Sunday night by promising that his pre-Budget Report, due in the next few weeks, 'will do more to recognise the vital contribution of modern manufacturing'.

The Chancellor reminded the CBI conference in Birmingham that cuts in capital gains tax and small business taxes are coming through. He said his Budget would 'significantly extend' cuts in capital gains tax. The rate for business assets, held for two years, would fall to 10%. It was 40% in 1997.

On a day when he had hinted at rises in other taxes, Brown also promised to extend cuts in corporation tax for small companies. On reform of planning laws, the Government will publish a Green paper in the next few weeks.

Brown, who sounded a note of caution on the euro, spoke as Labour launched a charm offensive at the conference. At least five senior ministers will be schmoozing with business leaders.

In the run up to the annual gathering there had been fears that Labour's relationship with industry was coming under new strain. CBI director-general Digby Jones and president Sir Iain Vallance are warning the Chancellor not to raid the business sector for any tax increases. Jones also said: 'We cannot have any more employment regulation.'

The warnings came as a CBI-Mori survey showed that 63% of firms have been hit hard by the terror attacks in the US. The study, of 249 firms in mid-October, found that companies expect a 13% drop in profit margins this year and 20% next year. A fifth have already cut investment.

The CBI is calling for a 0.5% cut in interest rates this week. A report from accountants BDO Stoy Hayward says that recent rate cuts and the prospect of more to come, should enable the UK economy to avoid recession next year.

Output in October was only slightly below July's, suggesting the effect of the terrorist attacks 'has not been as damaging as first thought'.