Labour blamed for crippling industry

LABOUR'S record on the economy came under fresh fire yesterday with the revelation that profitability in the manufacturing sector has more than halved since it came to power.

The news is another blow for the party, which is basing its General Election campaign on its economic performance under Chancellor Gordon Brown. It follows news that a million manufacturing jobs have been lost under his tenure.

The Office for National Statistics said that manufacturing profitability - the rate of return on capital employed - had fallen from 13.1% in 1997 to 6.9% last year. By the final quarter of 2004 it stood at just 6.1%.

Shadow Chancellor Oliver Letwin said: 'It is yet another indication of the problems caused by excessive tax and regulation.

'With 15 new regulations every working day and 66 tax rises, it is hardly surprising that manufacturing has seen profitability fall and productivity growth rates have fallen by a third.'

Companies' bottom lines were hit by soaring raw material costs. Steve Radley, chief economist at lobby group the EEF, said: 'Today's figures show fatter order books for manufacturers have not been matched by better margins. 'The priority for government in the next Parliament must be to address the rising cost of doing business in the UK.'

A Treasury spokesman said that overall, company profitability rose from 12.8% to 13.4% last year, indicating a bumper year for British businesses. He added that the European Commission yesterday forecast the British economy would grow by 2.8% this year - above the consensus forecasts of 2.6%, but below the Treasury's 3% to 3.5% expectations. This means the UK will outstrip its major European neighbours.

The EC slashed its forecast for the eurozone's growth from 2% to 1.6%.