UK business leaders have cautiously welcomed Chancellor Gordon Brown's plans for boosting government spending, while repeating their calls for public sector reforms.

Digby Jones, director general of the Confederation of British Industry (CBI), said the extra money had to be coupled with reforms that saw public services "put customers first".

Government now needs to fund services that improve UK competitiveness

British Chambers of Commerce

Mr Jones added that the tax rises announced in the government's April Budget had "incensed business so much" that it was now high time to get "more bang for the [public sector] buck".

The British Chambers of Commerce (BCC) echoed the sentiment and gave cautious praise for Mr Brown's spending plans.

Damage repair

BCC president Anthony Goldstone said the spending plans went "a long way to comfort businesses after a Budget that made firms lose confidence in the government".

He singled out the extra money for education, science and measures to raise workers skills and thus productivity, but called for "real reform in public services" that produced "significant results".

The Chancellor has rightly invested in the future productivity of British business with funds for education and transport

Digby Jones, CBI

The Engineering Employers' Federation (EEF) said the budget would "go some way towards repairing the damage done to relations with business in the last Budget".

More money for science teaching and research - now promised by Mr Brown - have been long-standing demands of the EEF.

Worries about skills shortages in the UK's work force have been an industry bug bear for some time.

The CBI's Digby Jones said: "The top priority must be ensuring young people are literate, numerate and ready for work, not lots of new initiatives."

Trade Unions, meanwhile, praised Mr Brown's plans.

John Monks, the TUC general secretary, called the spending review "bold but balanced".

He especially welcomed "the commitment to a devoted regional industrial strategy and the significant increase in the budgets of the Regional Development Agencies".

Roger Lyons, leader of the Amicus trade union, spoke of "a great day for jobs and a great day for manufacturing".

Economic worries

London's stock market was in turmoil on Monday, losing more than 5% to close below 4,000 points, but this had nothing to do with the Chancellor's announcement.

Investors dumped stocks - spooked by worries about more nasty news from Wall Street.

UK gilts - debt issued by the London government - barely moved in reaction to Mr Brown's spending plans.

But there were also worries that Mr Brown's plans could be undermined by economic upsets.

"We hope the Chancellor has got his sums right", said the BCC's Anthony Goldstone. "If growth stalls in the next few years and unemployment rises, the government will be hit with a double-whammy of lower tax receipts and a higher bill for unemployment benefits."

Ciaran Barr, economist at Deutsche Bank, said "for now... higher government spending has been welcome, helping to keep the economy out of recession in recent quarters", but warned that slow economic growth could spoil the Chancellor's plans.