Budget plea as survey shows fall in investment

BUSINESS leaders yesterday reiterated their plea to the Chancellor, Kenneth Clarke, for an investment- led and tax-neutral Budget later this month to speed economic recovery .

The call was backed by a report from the Confederation of British Industry showing that investment levels in manufacturing remain flat, while recession in Europe has taken the steam out of Britain's export performance in the past 12 months.

CBI leaders will be watching to see whether their message has hit home when Mr Clarke addresses the conference. The signs are, however, that he has ignored the CBI's request for higher investment allowances for industry and is prepared to raise taxes to curb the pounds 50bn budget deficit.

Sir Michael Angus, president of the CBI, said: 'There should be no further action on tax increases other than those in the pipeline, for fear of killing off the fragile economic recovery.'

On the CBI's plea for an extension of 40 per cent capital allowances, Sir Michael said: 'Levels of manufacturing investment are extremely worrying. Investment allowances do stimulate investment. We very much hope good sense will prevail and that these come through.'

The case for higher investment allowances was backed by Gavin Laird, president of the Amalgamated Engineering and Electrical Union, who said: 'The Government's loudly trumpeted end to the recession still has not materialised and they must take the opportunity presented by the first unified Budget to take some desperately needed action.'

Howard Davies, the CBI's director-general, said the Chancellor should aim to cut the public sector borrowing requirement by controlling public expenditure. The CBI has called for a pounds 10bn cut in spending over the next three years. According to the latest report from the CBI's National Manufacturing Council, industry is only meeting one of the three targets set a year ago to improve competitiveness. Productivity has risen 7.5 per cent against a target of 5 per cent. But investment remains flat against a target of doubling expenditure per employee, while exports have risen only 2 per cent against a target of increasing Britain's share of world trade by 1 per cent, or pounds 10bn. Sir Michael pointed out that investment in the second quarter had been 2 per cent down on a year earlier, while Britain's export performance failed to stop the trade deficit rising to pounds 7bn in the first half - pounds 1bn worse than for the same period in 1992.