Manufacturing Matters: Tax must give growth a chance: Mary Fagan on fears voiced at the Manufacturing Matters conference

LEADING figures in British industry yesterday called for a Budget for recovery and warned against further tax burdens that will jeopardise growth.

Neil Johnson, director-general of the Engineering Employers Federation, speaking at the Manufacturing Matters conference in London sponsored by the Independent, the EEF and the Amalgamated Engineering and Electrical Union, said that Britain was enjoying living standards higher than its industrial capacity could support.

He said that any tax increases should be on household income or expenditure rather than on industry savings or investment, adding: 'I believe the electorate, bruised by the perpetual crises and fixes of the post-war era, will understand the need for constraint if the purpose is honestly explained.'

Mr Johnson said that the UK still had an overwhelmingly anti-industrial culture. He praised the robust approach now being taken by Department of Trade and Industry but accused the Treasury of remaining isolated from the real world.

Mr Johnson said that in the first half of this year day-to-day consumption took 98 per cent of the national output, leaving nothing to invest in new capacity to produce. 'This is a serious deterioration. It has to be reversed - and fast.'

His calls for a long-term industrial strategy were echoed by Ian Gibson of Nissan, who said: 'There is only one message for any Budget - do not stop growth.' He begged the Government to look beyond this administration and the next. 'We need predictability and stability. I do not want a perfect world, I just do not want surprises.' He called on the Government and lending institutions to support medium-sized companies, which were regarded in other countries as pillars of industry.

He said that many of those companies had already disappeared and that they accounted for a huge proportion of lost jobs. Medium-sized firms needed to invest in skills and people now if they were to survive, and they needed help to do so, he added.

Earlier Bill Jordan, president of the AEEU, said that 3 million out of 7 million jobs had disappeared in recent years. He asked the Government for measures to help capital expenditure, which in turn could boost productivity, rather than force industry to cut still more jobs.

The plight of small and medium businesses and their difficulties in securing finance were again highlighted by Pen Kent, associate director of the Bank of England. He noted that 98 per cent of firms in the UK employ fewer than 200 people and that these companies would be the vehicle for job creation in the economic upturn.

Mr Kent said that much of the finance provided by banks for smaller firms was short-term. He called for banks to be more open with clients when assessing proposals for loans and for companies to give better information on their plans. He questioned whether lending managers moved posts too often to build relationships. He went on to ask if banks could look on companies more as going concerns than as security.

Mr Kent said that, in the longer term, price stability lay at the heart of the relationship between industry and finance. He believed that the short-term focus taken by many companies and financiers was inevitable against the uncertainty that has dominated Britain's economic life over the decades. 'Manufacturing capacity and capability must be built up without the interruption of violent boom and bust cycles,' he said.

The Confederation of British Industry called for action as well as words to stimulate recovery. Mark Radcliffe, adviser to the CBI's National Manufacturing Council, said increases in productivity must be maintained despite the current weak investment and export levels. He urged the Government to support industry's efforts through positive action in the Budget.

Tim Sainsbury, the industry minister, said: 'The Government's commitment to manufacturing industry is right at the heart of our policies. It is not a matter of a grand programme, rather to make sure the needs of manufacturing are a continuous influence on the actions of government.'

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