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Sunday, 4 November, 2001, 09:38 GMT
CBI seeks to restore credibility
CBI Conference 2001 graphic
By BBC News Online's Mike Verdin

Thank goodness there is at least one certainty about business life.

The terror attacks have added further blurring to an already unclear global economic outlook.

And the vital signs of the UK economy are proving as consistent as April weather patterns.

But if there is one copper-bottomed bet about UK industrial affairs, it is that taxes, or at least talk of decreasing them, will accompany the annual Confederation of British Industry meeting.

Tax pleas

Last year, petrol duty stole the limelight, as the country awaited Chancellor Gordon Brown's reaction to demands for a reduction in levies.

Digby Jones, director general, CBI
Digby Jones: Tax warning

This year, industry bosses are worried that heavier taxation, to fund headline-grabbing initiatives, might fuel a decline among UK businesses already reeling from a cocktail of sad tidings.

Mr Brown has no scope for extra business taxes, and should resist the urge to "pull surprise spending plans out of the hat", CBI director general Digby Jones said in announcing a wish list of measures for inclusion in the next Budget.

Indeed, the chancellor should, rather than milking companies, investigate ways of fattening them, and prepare an emergency corporate aid plan in case the economic slowdown "significantly worsens", the CBI said.

U-turn?

And little wonder when export prospects for UK factories deteriorated in the July-to-September quarter at their fastest rate in 21 years, the CBI's Quarterly Industrial Trends survey revealed recently.

A range of data have painted a "deeply worrying" picture of UK economic prospects, the CBI said.

And manufacturers are set to fall further behind their services-based brethren.

"Many sectors are experiencing the worst conditions since 1991," Mr Jones said, issuing the CBI's first call in three years for a full half percentage point cut in interest rates.

This was the same Mr Jones who a month before was urging executives not to talk Britain into a serious downturn.

"We must resist the doom and gloom scenario," he said then.

"Business sentiment remains resilient, and across the country firms are calling for the need to pursue a business-as-normal policy," he added.

Upsets

Still, in the current economic climate, the CBI, can be forgiven for the odd inconsistency.

Sir Iain Vallance
Sir Iain Vallance: No longer BT head

Who would have guessed a year ago that the confederation's president, Sir Iain Vallance, would lose his job as chairman of British Telecom?

Who would have thought that the winner in December of the CBI/Real Business company of the year award - Claims Direct - would in June report a 20m loss and, a month later, come under a government probe?

And what traditionalist would have predicted that the CBI could join the Trades Union Congress and publish a joint report, as they did last week, on how to improve productivity?

The answer to the productivity question, of course, involved taxes. Tax credits, in fact, for employers which provided basic skills training.

Avoiding a euro debate

However, the CBI will be doing its best to avoid one area of controversy - the vexed question of the UK's membership of the euro.

It has decided to put off a survey of members' view of the single currency until next summer, giving time for the adoption of the euro as a cash currency in the 12 countries of the eurozone to take effect first.

In its last survey, 52% of CBI members favoured euro membership in principle.

But Digby Jones has made it clear that the CBI will not campaign for euro membership until the government does.

Key speeches

The skills issue will be further explored at a conference debate "School today, work tomorrow", which will, promisingly, put Consignia (formerly Royal Mail) head John Roberts, whose business has been one of the UK lay-off leaders this year, on the same platform as union supremo Bill Morris.

John Roberts, chief executive, Consignia
John Roberts: Firm has laid off thousands

Other highlights on the agenda include speeches by e-Envoy Andrew Pinder and, intriguingly, by Romanian prime minister Adrian Nastase, whose countrymen earn, on average, less than 90 a month.

While Mr Monetary, Bank of England Governor Sir Edward George, will not address the conference this year, Mr Fiscal, the Chancellor, will.

"That is certainly the highlight of the conference as far the City is concerned," Jeremy Hawkins, economist at Bank of America, told BBC News Online.

"For mercenary City types, the rest of the conference is probably not so important."

Credibility problem

Indeed, the CBI does face a challenge in restoring some credibility, after predictions in 1998 and 1999 of a deep UK economic slowdown proved unfounded, said Stephen King, managing director of economics at HSBC.

"Certainly manufacturers cannot be having a good time," Mr King said, when asked about the results of the CBI's Quarterly Industrial Trends report.

"But the problem for the Bank of England when it comes to considering the CBI report is that the CBI did not give the right message two or three years ago, so how much importance should be attached to the latest findings?"

The Bank's Monetary Policy Committee will have a chance to give their answer next Thursday when they make their latest decision on interest rates.

Key event

So when John Cridland, the confederation's deputy head, stands up at 9am on Monday at Birmingham's International Convention Centre, he will open a conference of more than ceremonial significance.

Will the confederation increase its City standing?

Will Gordon Brown trail a package of palliatives for business ills?

Will sparks fly at the "school today, work tomorrow" debate.

BBC News Online will be on hand to view how taxation and other key corporate issues fare before the massed ranks of Britain's corporate supremos.

 WATCH/LISTEN
 ON THIS STORY
The BBC's Karen Hoggan
"The employers want reassurances that the government is still business friendly"
See also:

03 Oct 01 | Business
Consignia cuts 1bn to stem 'crisis'
30 Aug 01 | Business
Claims Direct sale provokes outrage
26 Apr 01 | Business
Vallance resigns from BT
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