Government will 'make or break' business in 2003, says CBI

Government actions next year stand to 'make or break' British business, according to the Confederation of British Industry (CBI).

Speaking during its annual address, the Confederation's Chief, Digby Jones, urged the Prime Minister, Tony Blair, to repair the "bruised" relationship between the Government and UK business.

His speech included strong words on the trade unions and the European Union - institutions that he said must make tough choices against an uncertain economic backdrop in 2003. He also urged the UK Government to choose between a low-tax, flexible economy or the gradual erosion of the UK's competitive advantages.

He said: "During 2002, the Government did not make the UK a better place to do business. Company taxes went up, regulation went up and improvements in public services were patchy.

"What we saw was the continuing erosion of our competitive position. Business has worked constructively on issues ranging from public services to minimum standards at work. But now Ministers must decide whether their long-term objective is indeed a low-tax and flexible economy.

"In 2002, the Government did not make the UK a better place to do business" - Digby Jones, CBI

"Some recent signs have been encouraging. Since the April Budget there has been a refreshing dialogue between business and senior members of the Cabinet. But it is actions not words that will influence business opinion. This will be a crucial year for the Government-business relationship."

On the EU, Digby Jones says policy makers should start choosing economic reform and institutional accountability ahead of "damaging and unnecessary" social legislation.

"British business supports the EU but the last year has been deeply disappointing. We have seen only limited progress on economic reform but a major push for more social legislation that too often does more harm than good.

"In 2003, we have key decisions on legislation covering agency temps and the laws on working time. We will support the Government as it stands up and fights for UK prosperity so we can preserve our unique labour market, which is the most successful in the EU. The EU competes in a global economy - something Brussels and outdated ideology too often forgets."

Mr Jones added 2003's weak global economic outlook underscored the need for business-friendly tax and labour market policy.

"We expect a modest pick up in UK growth but for many firms this won't feel like a recovery. I'd rather be in business in the UK than anywhere else in the EU but that does not mean that 2003 will not be extremely difficult.

"Companies have just been through a bruising year and many are feeling punch-drunk, particularly in the manufacturing sector. We should never forget that there is only so much a business can withstand."

The CBI joins other organisations including the Chartered Institute of Taxation (CIOT) in identifying key areas requiring legislative change in 2003. Calls from the CIOT and the Federation of Small Businesses centre around the legislative burdens of the current taxation system on small businesses, who have both warned a lack of action by the Government will lead to long-term damage in the sector.