But Mr Moirhead said that as part of the franchise renegotiations with Sir Alastair Morton's Strategic Rail Authority, it would offer proposals to replace all 86 high-speed trains on the route. The company is also considering buying additional rolling stock for its North Western and Great Eastern franchises, both of which expire in 2004. Mr Moirhead rejected criticisms of its decision to bring carriages damaged in the earlier Southall crash back into use on Great Western. The increase includes a 28 per cent rise in operating profits from its rail division to £17.8m. Mr Moirhead said the results had been overshadowed by Paddington. But he added: "We see no conflict between our company making profits and generating revenues and the objective of creating a newer and safer railway." He said that as part of FirstGroup's existing investment programme it planned to spend £210m on new trains and station improvements for its Great Western and North Western franchises in the next three years - double the profits from its rail division and 12-times the interim dividend paid to shareholders. FirstGroup is replacing 70 train carriages on Great Western and another 70 on North Western at a cost of £140m. But he said: "It must be the most attractive proposition because the existing high-speed trains are getting old." He was speaking as FirstGroup defended a 21 per cent increase in first-half profits to £55m, coming so soon after the Paddington disaster. Richard Jeffries at CCF Charterhouse said the report was "not an immediately significant event" for equity markets, though some of the measures could push gilt yields down, which would be good for shares. Politics: Brown set for election giveaway. FIRSTGROUP, one of the two rail companies involved in the Paddington crash, may replace its entire fleet of high-speed trains on the Great Western line in a move which analysts believe could cost £500m to £1bn. The offer is likely to form part of FirstGroup's case for being granted an extension of its 10-year franchise to operate the Great Western service which expires in 2006. Moir Lockhead, chief executive of FirstGroup, refused to be drawn on the level of investment that would be entailed or how long an extension it would be pressing for. FIRSTGROUP, one of the two rail companies involved in the Paddington crash, may replace its entire fleet of high-speed trains on the Great Western line in a move which analysts believe could cost £500m to £1bn.

This would help reduce the City of London's dominance and help avoid the snobbery which sometimes affects businesses from outside the South-east." Some business leaders were unequivocal in their praise. Alan Sugar, chairman of Amstrad, the consumer electronics group, said: "I have to say I'm impressed. I think the measures on capital gains tax and shares for start-up and high-tech companies will work. "The small businesses are the backbone of this country. We must not be hoodwinked into believing that it is the GECs and Ford Motor companies - it is the 50-employee and 25employee (companies)." The Engineering Employers' Federation said it found "encouragement" for engineering and manufacturing firms. "Those business owners looking forward to the future have little to cheer, as business rates, red tape and regulations have not been tackled," said the forum's chief executive, Stan Mendham. Steve Alambritis, head of the Federation of Small Businesses, said he was pleased with the end of the so-called "fuel-escalator", which has increased smaller companies'' distribution costs. He also welcomed the move towards regional development agencies.

"We think this might lead to the reintroduction of regional stock exchanges which were abolished in 1973. "Sometimes it is not the tax burden which is a problem for business, it is battling through all the regulations." Accountancy firms said Mr Brown had not helped small businesses as much as hoped. KPMG claimed smaller quoted companies had been largely ignored by the Chancellor. Pannell Kerr Forster said the speech was "big on soundbites but lacking in substance" and small businesses would continue to be stifled by red tape. The Forum of Private Business described the Chancellor's report as a "missed opportunity" for private enterprise. We particularly welcome the changes to capital gains tax, not just the overall reduction but also the time-related sliding scale. This should help differentiate between genuine, long-term investment and short-term speculation." Ruth Lea, head of the IoD's policy unit, said she would like to see a lot more simplification in the tax regime. It clearly recognises the importance of creating wealth - to the widespread benefit of society - as opposed to concentrating solely on its distribution. Adair Turner, director general of the Confederation of British Industry, said: "This is a prudent and business-friendly pre-Budget report.