Give us a break, pleads CBI

TONY Blair will be taking a break from prosecuting America's diplomatic offensive on Monday to spend a little time with Britain's industrialists in Birmingham.

It is just as well as manufacturing is hurting and many of the City and business-friendly promises made by Labour are starting to look threadbare.

In conversation this week, CBI director-general Digby Jones left little doubt that industry is restless. The combination of a weak euro (or strong pound), business unfriendly red tape and climate taxes have pushed manufacturing into serious recession.

Instead of relieving regulatory pressure, the government, in Jones's view, is threatening to make matters even worse by passing legislation which could result in businessmen ending up in jail, as it seeks to stamp out cartels in the name of competition.

One does not have to look far across the industrial landscape to see the present sickness. ICI - laden with debt, exposure to the United States and a legacy of environmental problems - is laying people off. Telecoms equipment group Marconi is struggling to survive.

'Manufacturing is in big trouble,' Jones says. What frustrates him is that people now say this does not matter because it only represents 20% of national wealth.

This, in the view of the CBI boss, is a misreading of the statistics. A further 2.5m jobs in the service industry 'depend completely' on manufacturing and there are many other service sector jobs, including those in finance, beyond that. So anyone who writes off manufacturing is 'making a big mistake'.

The prospect of the slump spreading - from the sector of the economy which makes things, to consumers - is underlined by the CBI's latest retail survey. This showed that retail sales in October were the lowest for a year, with fears that they are heading for a standstill.

Given that the authorities are counting on consumer spending to keep Britain out of recession, the call for a further half-point cut in interest rates when the Monetary Policy Committee gathers next week has a new leg.

Things are not going to become any easier post 11 September. Jones believes that the attacks 'accelerated' the slowdown and will delay upturn. That is certainly the message from the US where consumer spending slumped by 1.8% in September, the biggest monthly decline since January 1987.

What the CBI most wants from Gordon Brown in his pre-Budget Report (like almost everyone else) is some tax breaks. In particular, Jones would like to see an end to the climate change levy which will raise an estimated £800m from industry this year.

'I've got members in South Wales and the West Midlands who are laying off people so they can afford to write cheques to the government for the energy tax,' Jones asserts.

'Business is not ignorant of the environment and their obligations,' he insists. Unlike some of his predecessors as CBI chieftain, Jones is not apt to blame all the ills of manufacturing on failure to sign up to the euro.

Jones would rather talk about the shortcomings of the European Commission in adopting a more entrepreneurial style than the missed opportunities of being outside euroland. He recognises that this is a subject he will need to fine-tune next year when the currency changeover takes place.

Having suspended regular research on the euro issue among its members since taking over at the CBI in 2000, he will next year embark on the most comprehensive poll on the issue in the employers' group's history.

The agenda will not be driven by bigger members such as Unilever and Vauxhall, which are firmly in the europhile camp. Jones is seeking a far broader spectrum of business opinion. He wants the research to be firmly rooted in economics rather than politics.

The results 'will show what big business thinks, what manufacturers think, what farmers think, what service industries think, what smaller companies think, what they think in Yorkshire and what they think in Scotland'. This will inform the government on the true business temperature.

Jones is clearly anxious not to make an enemy of government, which is turning out in force for this year's CBI conference with the Chancellor, Prime Minister and Trade Secretary among the speakers.

He tiptoes carefully around the Railtrack debacle, arguing he does not believe that Stephen Byers set out on a 'confiscation exercise'. Jones subscribes to the cock-up theory that poor planning and communications left many people 'feeling upset and confused.'

He accepts that it has been damaging for confidence in the City. 'It is not helping in keeping Britain attractive to foreign investors,' Jones opines. Quite.