End of the Labour love affair?

AFTER five years, the cracks are appearing in the successful relationship between Labour and its business backers. Former British Airways chief executive Bob Ayling, one a very vocal supporter of the Government, last week questioned its competence. Ayling suggested its close ties with business were about to disintegrate in a mass of strikes and bungling and he warned of a return to the 'damaging imbalances of past Labour Governments'.

Ayling, who as chairman of Dome management group the New Millennium Experience held a very poisoned chalice on behalf of the Government, may well have an axe to grind. However, subsequent remarks by Northern Foods chairman and long-time party supporter Lord Haskins that Prime Minister Tony Blair was a 'charming' but 'shallow' figure, in the New Statesman magazine, were more unexpected.

Both views though find some resonance within a business community so pleasantly surprised by the bold reforms of the Government's first term. Then, Chancellor Gordon Brown's economic management won the kind of business trust unthinkable under the Labour Governments of Jim Callaghan or Harold Wilson. Even the introduction of the minimum wage proved remarkably painless, while cutting the Bank of England free from its political shackles won Labour unprecedented plaudits from the City.

However, the New Labour project is now collecting black marks. For business, Transport Secretary Stephen Byers's de facto renationalisation of Railtrack remains by far the largest stain on its copybook. With almost daily strike threats from various rail unions, the transport issue looks set to remain a major political headache.

There are worries too, that, despite Government assurances that the private sector will play a growing role in the provision of health and transport services, April's Budget could signal a return to traditional left-wing policies of tax and spend.

With the Prime Minister focused more closely on foreign policy, and Gordon Brown just back at work after the death of his baby, some in the business community wonder if the energy and innovation that characterised parts of the first term can ever be fully restored.

'Everybody felt this was a bright, buzzy, young administration, and even someone as right wing as me knew that after 18 years the Tories had to go,' said David Buik at spread-betting bookmaker Cantor Index. 'But there has been a lack of innovative thought under this Government and the quality in depth is now very poor. The Chancellor's performance has been first class and his back-up team is quite competent, but the Department of Trade and Industry gets three out of 10 and Patricia Hewitt hasn't brought much to the party there.

'Stephen Byers has been a nightmare. His decision with Railtrack dented City confidence a fair bit because it showed a lack of understanding of the way business should actually work with Government.'

The Institute of Directors has a similar view. With the Government's economic management still winning praise, transport has become the key issue for its members. In London, it says, the lack of clarity about a future alternative to Railtrack has been compounded by long delays and disputes over investment in London Underground.

'Infrastructure looks appalling but I think the key thing is that while the economy is doing reasonably well, business confidence in the Government will still be there. However, recent events with poor old Railtrack and problems with the unions are damaging confidence,' said Ruth Lea, who heads the IoD's policy unit.

So can Labour heal the wounds? John Williamson, director at branding consultant Wolff Olins, was a key architect of the Cool Britannia image which accompanied the party's early years in office. 'When New Labour came to power it was shocking that it was aligned with business,' Olins said. 'It represented a new managerial class and a new entrepreneurial business class, but what Blair has done more of now is become a global statesman.

'He is not spending enough time with business. Somewhere down the line he has to refocus on business, but that's difficult because this is a Government which depends heavily on Tony Blair - and when he's absent, that becomes clear.'

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