THE mixed economic data continued today with warnings over the state of the public finances and higher unemployment than the European average.

While the economy is officially out of recession, and with a range of industry surveys showing improving productivity across sectors, there continues to be more pessimistic data as well.

According to a leading industry group, repairing the public finances will require tax rises or spending cuts of up to £15bn a year.

The Engineering Employers Federation urged the Chancellor not to use the Budget later this month for “eye-catching” announcements on public spending as it would risk damaging business confidence.

The federation said it believed the current debate about the timing of deficit reduction missed the point and was deflecting attention from how fiscal adjustment could be achieved.

Director of policy Steve Radley said: “At a time of economic and political uncertainty firms need stability in the tax system and business environment. Manufacturers will be looking for a credible plan on how the public finances will be repaired rather than new spending that will have to be clawed back at a later date.

“That plan must be based on a full review of the government spending priorities and on the need to ensure the UK’s tax system is internationally competitive.

“Manufacturers are likely to keep investment plans on hold if the government fails to address these issues.

“Just as important is the fact that any fiscal gains from lower than expected unemployment were mainly down to companies and employees working together to minimise job cuts and retain skills.

“Business will be perplexed if they end up being rewarded for this with higher taxes to fund new spending commitments rather than to reduce borrowing.”

It comes on the same day that the body representing human resources professionals claimed that unemployment in the UK is “relatively high” by European Union standards even though the jobless total increased by less than expected in the past year, according to a new report today.

The Chartered Institute of Personnel and Development (CIPD) said this country was no better than a “mid-table” performer in the EU unemployment league as well as having a high rate of “hidden” joblessness.

A study of all 27 EU member states showed that male unemployment was high, with only eight other countries having a worse rate.

The UK’s economic inactivity total, which the CIPD said showed the number of hidden people out of work, accounted for one in seven of Europe’s entire total, said the report.

Only Estonia, Latvia, Italy, Austria and Poland had higher rates, said the report, which was published ahead of new unemployment figures on Wednesday.

Dr John Philpott, the CIPD’s chief economic adviser, said: “The UK may draw comfort from having lower measured unemployment than the EU average but in truth we are no better than a mid-table performer in the EU jobless league.

“Taking hidden joblessness into account makes the UK’s relative performance look less impressive still, and once again highlights the scale of the macroeconomic and employment policy challenge that awaits us in the next few years.”

A separate study found that most smaller firms believe the Government and banks have not done enough to support them during the recession.

A survey of 650 businesses by XLN Telecom showed most were dissatisfied with the Government’s handling of the financial crisis.

Only one in four expressed any optimism about the coming year and nine out of 10 said small firms were having to carry “unfair tax burdens” as a result of banks being bailed out.

The survey showed 16% of firms expected to take on more staff this year, with one in 10 predicting job cuts, with almost two out of three expecting staffing levels to remain the same.

XLN chief executive Christian Nellemann said: “Our survey shows that in employment terms, small to medium-sized enterprises are starting to turn the corner, but they feel angry by the lack of meaningful support shown to them over the last 18 months by the Government.”

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