The Confederation of British Industry (CBI) called for a cut in red tape and a halt to new taxes as manufacturing output fell for the second successive quarter.
Figures from the Office for National Statistics (ONS) showed factory output in the last quarter of 1998 down 1.3% on the previous quarter and 0.6% down on the last quarter of 1997. December’s output figure was down for the fifth consecutive month, the longest fall since the early 1980s.
Manufacturers were also squeezed by a fall in the price of manufactured goods. Producer prices were revised down to show a 0.1% fall in the year to December 1998, the first annual fall since records began in 1958.
The CBI’s budget submission warns that tax rises may make deflation more likely. It calls instead for measures to help smaller companies, including R&D tax credits and permanent 100% first year capital allowances.
Sir Clive Thompson, CBI president, said: ‘We want changes aimed at reducing bureaucratic burdens, which weigh heavily following recent legislation that has cost business an extra £5bn a year.’
Energy and transport taxes could reduce the UK’s competitiveness, says the CBI. ‘The approach to CO2 reduction in energy intensive sectors must focus on negotiated agreements and tradeable permits.’
And it says government should make sure that revenue from transport taxes, for example local congestion tolls, should be spent on improvements to the transport system.
Proposals to cut red tape include changing corporation tax rules to avoid paying tax on forecast profits; minimising the administration needed for the working families tax credit; and minimum wage implementation. The CBI says the minimum wage law will be ‘effectively self-enforcing’.
* Automotive companies are more pessimistic about the UK economy than those in other industries, according to a survey by software company JBA. In the automotive sector, 64% of companies predict a weaker economy over the next year, compared with 42% in food and 31% in footwear and clothing.
* Trends, p46