Business and unions warn Blair not to scrap export arm

Business and trade union leaders last night joined forces to urge Tony Blair not to abolish the body which provides financial support for UK exporters, warning that the imp- act on manufacturing would be "disastrous".

The director-general of the Confederation of British Industry, Digby Jones, and the general secretary of the Trades Union Congress, John Monks, have written to the Prime Minister saying there would be "a significant loss of business and employment" if the Export Credits Guarantee Department is scrapped.

The letter follows mounting concern in industrial circles that a review currently taking place of the ECGD will lead to a curtailing of its activities or outright abolition.

Mr Blair was told that the review – the fourth in the last four years – was causing considerable uncertainty throughout industry and affecting the investment decisions of major international companies.

The ECGD underwrites some £5.6bn of UK exports and investments a year, the majority of them in developing countries, benefiting industries from aerospace and construction to engineering and medical equipment. In the civil aircraft industry alone, ECGD support is estimated to have helped safeguard 60,000 jobs last year. The ECGD made a net contribution to Treasury coffers of £205m last year.

Mr Jones and Mr Monks said there was a perception that other countries offer companies better export credit deals, a situation that has been exacerbated by the latest review.

"If the Government were to abolish ECGD or curtail its operations, the effect on UK manufacturing would be disastrous," the CBI-TUC letter says. "Most large manufacturing companies have become global operations and are already under pressure to switch activity to other countries. This can only be reinforced if these countries have more effective export credit agencies."

The letter argues that the effects would be felt most severely among small and medium-sized businesses, which are heavily dependent on big companies acting as prime contractors for picking up overseas work.

The short-term export credit arm of the ECGD was privatised by the Conservatives. Privatising the remaining long-term business was looked at two years ago when the last review took place under Stephen Byers, then Secretary of State for Trade and Industry. The review decided against privatisation on the grounds that long-term export insurance would continue to need a sovereign guarantee.

Mr Byers accepted the conclusions of the review, which he said "strongly reaffirms ECGD's role in bringing benefits to the UK through its support of UK exporters and investors in overseas markets".