Nikko warns on Social Chapter

After the backlash over the planned windfall tax last week comes the first sign of disenchantment with the Government's pledge to sign up to the EU's Social Chapter.

The deputy chairman of the investment bank Nikko Europe warned yesterday that this could threaten future inward investment in the UK.

Haruko Fukuda said, in a speech to the Eurosceptic Bruges Group, that Labour's move would create uncertainty about the future business environment in Britain in the minds of Japanese investors.

"Japanese businessmen will therefore be watching very closely over the next few months to see whether the new Labour government takes measures either in the social security, or in the employment or in the corporate tax fields which make it less attractive for Japanese shareholders to invest in Britain rather than elsewhere," she said.

Echoing the caution of the last government, she said: "The philosophy of social Europe appears to be one which finds its ideal where all European industry is equally uncompetitive.

"I find it difficult to believe that such a social Europe would be attractive to foreign investors."

The worry was that the Social Chapter was an unknown quantity, with very little legislation actually passed under its auspices so far, Miss Fukuda said.

It was a "bulging pipeline of unspecified employment legislation".

In addition, the Labour Party remained an unknown quantity to Japanese investors.

Miss Fukuda said: "Signing up to the Social Chapter is a reversal of the hard-won radical change in the business culture in the UK of the past 18 years which has been so clearly recognised and admired by the international business community."