Britain's business leaders have called on the chancellor to consider a range of measures to help the manufacturing industry.

The CBI and British Chamber of Commerce have called on Gordon Brown to take action to help businesses struggling in a sector of the economy which is now officially in recession.

Cutting red tape, tax credits and moving forward the launch of the manufacturing advice service were among the measures recommended by the two groups.

John Cridland, the CBI's deputy director-general, said despite the rise of the service industry, manufacturing businesses were critical to the economy and although a global slowdown had caused the downturn, the government could do more.

"Most of the current problems are due to external factors. But the government must help by following through on its promise to make Britain the best place in the world to do business," he said.

Cridland said there were several key areas Gordon Brown and his Treasury team could focus on. "The chancellor must put the right building blocks in place to help manufacturers in their continuing drive to boost productivity. Tax credits for research and development will be particularly important, providing they are well implemented," he said.

His comments were backed by the British Chamber of Commerce which described the situation as "worrying".

"There are 11 out of 13 manufacturing sectors showing a contraction. The most worrying aspect is the breadth of the areas affected; it's not just the 'old' economy. We were very pleased to see the rate cut but it won't make a huge amount of difference. What we are facing is beyond our control to a certain extent," spokesman Andrew Parkinson told ePolitx.com

The chamber called for a series of other measures including lobbying banking leaders around the globe to make a co-ordinated response to the current crisis.

"The European Central Bank could do more. It has not cut its rates as it was expected to. A concerted effort by central bankers around the world to kick-start export markets," Parkinson said.

The organisation, which represents many small and medium size firms, also argued they needed relief from increasing levels of regulation.

"It's a cumulative effect. Companies are facing, or set to face, new rules on the working time directive, parental leave and even the recycling of electrical equipment. On their own they don't have a big effect but add them together and there is a problem. Small companies don't have the resources to deal with them and are buckling under the strain," said Parkinson.

The group called for the government to speed up the introduction of several initiatives which would benefit manufacturers and help meet Gordon Brown's targets of improving productivity.

"The manufacturing advice agency is due to be set up in April 2002. There's no reason why that can't be brought forward. Gordon Brown might also consider introducing an investment tax credit for research and development and training. With an incentive from the government, manufacturers could invest their way out of recession," Parkinson said.

Action needed to happen sooner rather than later, the group warned. "It's very important that some short term solutions need to be found to support manufacturing through what will be some tough times. With better skilled staff and improved production, companies stand a better chance of surviving. Once a company goes to the wall it tends not to come back," he said.