TUC's proposals:

�540m to regional development agencies �200m in tax credits for large companies' R&D �150m in tax credits for skills development �40m to job schemes in areas of high unemployment

Bemoaning the UK's "productivity gap", the TUC's Secretary General John Monks said effective and targeted investment are vital to create a world-class British industry.

"We need smart support to give us a high wage, hi-tech manufacturing sector that will trail blaze 'made in Britain' across the globe," he said.

"Old style subsidies and setting an objective of simply treading water will result in us slipping further behind," he said.

Inefficient

Manufacturing accounts for about a fifth of the UK's gross domestic product.

John Monks: It is time to catch up

But productivity growth in British factories is lagging behind that of manufacturing businesses in other European Union countries and the US.

The TUC said R&D and training tax credits would boost productivity growth.

But it did not call for higher taxes to pay for the extra expense.

According to the Bank of England, productivity in the UK manufacturing has been growing below the long-run average of 2% per year for most three-month periods since 1995.

Chancellor Gordon Brown is due to unveil his 2002 budget on 17 April.