Brown has 'lost trust' of UK business

Prime Minister Gordon Brown has lost the "confidence and trust" of British business in less than a year in office, according …

Prime Minister Gordon Brown has lost the "confidence and trust" of British business in less than a year in office, according to the head of a leading manufacturers group.

Mr Brown also risks sparking an "exodus" of British companies to more favourable tax regimes like Ireland, said Martin Temple, chairman of the EEF (Engineering Employers Federation) manufacturers trade body.

"I wouldn't say it's a major trend yet, but if we don't watch it, we'll get this [exodus]," Mr Temple told the Financial Timesnewspaper. "It's dangerous territory".

The FT said Temple noted there were strong disincentives to moving to lower tax jurisdictions, such as relocation costs, but warned: "There is a point whereby if you lose confidence in the system and it starts to become expensive, you start thinking about this."

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"We are absolutely on the edge of that," he told the paper.

Mr Temple's comments came just days after some of the biggest names in British businesses also warned the government it risked a corporate exodus if it pressed ahead with tax proposals on foreign earnings.

A delegation from the Multinational Chairmen's Group expressed their concerns at a meeting with Mr Brown and finance minister Alistair Darling around 12 days ago, according to media reports at the weekend.

Drugmaker Shire and media group United Business Media have recently decided to shift their tax domiciles from Britain to Ireland, piling pressure on a government already facing sharp criticism from both business and voters.

Mr Brown's ruling Labour party lost heavily in local elections in England and Wales last Thursday, and was beaten into third place in the overall vote behind the leading Conservatives and the Liberal Democrats.

Mr Temple told the FT the tide of businesses opinion on mR Brown had turned after the pre-budget report last autumn, in which the government announced it was scrapping a 10p tax rate for business assets held for at least two years.

"All of a sudden we felt we didn't know what the policy and the direction was on taxation, because all those fundamentals we'd had over 10 years suddenly disappeared overnight for no apparent reason," he said.