Mandy tries to hold back tide

PETER Mandelson's warning against 'exaggerated gloating' over the performance of the UK economy at the CBI conference will have infuriated Gordon Brown ahead of the Chancellor's own appearance at the gathering in Birmingham today.

But the audience of businessmen and women had other things on their minds than the latest punches thrown in the feud between the Blairites and the Brownites - and uppermost among them was Europe.

The drizzly West Midlands gloom reflected the muted mood inside the conference hall where, in a sign of the times, delegates were allowed access only after standing in a long snaking queue to be frisked and scanned at a security point.

The over-riding preoccupation of this year's conference is how Britain - and the sclerotic economies of Europe - can compete in an era of globalisation, where we are faced with a growing threat to jobs and wealth from China and the developing world on the one hand, and the dynamism of the US on the other.

Britain does offer its own distinctive model of economic success, but we do not operate in splendid isolation from the rest of the world.

It is true that economic growth in the UK is meeting Brown's targets and comfortably outstripping the eurozone. But with China achieving 9.1% in the third quarter of the year, Mandelson has a point when he says we should not get too carried away with how well we are doing.

The CBI leadership under its ebullient director general Digby Jones, while shying away from thorny issues such as Britain's membership of the single currency and the European Constitution, is clamouring vociferously for economic reform in the EU.

In particular, Jones wants to call a halt to the sheer weight of regulation being heaped on UK businesses from Brussels.

He believes that the new European Commission, led by Jose Manuel Barroso, represents an opportunity for reform, and that the eastern European nations and even possibly Germany would back Britain.

Mandelson, the incoming European Commissioner for Trade, gave short shrift to the anti-Europe lobby - which has a strong hold in the small business sector in particular - arguing that Britain is better off with a strong voice in the EU.

But he did promise an assault on red tape. Indeed, the assiduous former cabinet minister added that he had already penned a paper on the subject of regulation which he intends to present to the new Commission.

His suggestion that the new Commission should subject all proposals for new legislation to a 'searching test' on their likely effect on growth and jobs makes sense. And there is no gain in the assertion that if EU regulation is improved to the standards of the best in the world, it will have a 'colossal impact' on growth.

But sceptics would question whether the energetic Mandy can hold back the waves of Brussels regulation or whether he will be forced Canute-like to submit to the inexorable tide.

Europe desperately needs to become more competitive, as last week's report by former Dutch prime minister Wim Kok highlights. The concern of the CBI leadership is that both the Continent and the UK are suffering from an aversion to risk and to personal responsibility that has produced too much regulation and too little enterprise.

Britain's businesses are operating against a background of fear and uncertainty.

The interests of our business community - and the lives of their staff - are under threat from terrorists both at home and abroad. More than half of UK firms feel vulnerable to attack, whether from al Qaeda or violent animal rights extremists.

Eliza Manningham-Buller, the director general of MI5, underlined the seriousness of the menace in the first ever conference speech about security. Clare Short, former International Development Secretary, hardly helped the mood when she said that failure to sort out the problems of the Middle East could lead to an oil price spike and world depression.

More economic uncertainties loom in the aftermath of the US presidential election. A weaker dollar poses yet another threat to growth in the eurozone. Jean-Claude Trichet, president of the European Central Bank, recognised this plainly yesterday when he sent out a message aimed at discouraging the euro's rise to record highs against the dollar, characterising the fall in the greenback as 'brutal' and 'not welcome'.

In this climate, CBI president John Sunderland is right to point out that the EU's regulation addicted mindset towards business is not merely costly - it risks being suicidal.