Hard-pressed manufacturers could be forced out of business by what some companies are branding a tax-on-jobs budget.

London manufacturing organisation "Made in London" expressed alarm at the impact of what it claims is a 10 per cent rise in employers' national insurance bill.

"It is a bill they have to pay, whether they are large or small and whether or not they are profitable," said spokesman Jodie Eastwood.Bosses fear they are to be hit by a double wage whammy as workers step up pressure to boost pay packets following a rise in their own national insurance contributions."This will be the death-knell for a significant number of manufacturers; the extra cost will be too much for them to bear on top of the problems they already face," said Eastwood."Others will have to take the only option available to cut this extra burden on employing - and that is to shed labour. The direct impact of the national insurance rises will be a rise in unemployment. That is because this is a blatant tax on jobs."

But the Royal Academy of Engineering hailed the £400 million allocated by the chancellor to research and tax credits as "an excellent start" for innovation and the future of engineering.

"We have been impressed by the government's willingness to listen to industry at every stage of this process," said academy chairman Rob Margetts.

"This scheme will work well at both corporate and local level. Research is the engine of value creation. We shall be continuing to encourage ministers to develop this important scheme in future years."

But Eastwood is sceptical that the credits will make a difference to manufacturers.

"Tax credits will only benefit the few, and bring nothing to the crucial small business sector which represents more than 80 per cent of manufacturing," she said.

"The small companies corporation tax cuts will help only companies in profit, not those which are struggling to survive."