British Prime Minister Tony Blair says victory in the war against international terrorism is necessary to protect the world's economy. Mr. Blair spoke at a British business conference Monday.

Prime Minister Blair told the captains of British industry that economic confidence and prosperity hinge on the defeat of terrorists. "Winning the battle against international terrorism is to win for the economy, too," he said. "Jobs and living standards, business and trade need us to defeat this terrorist menace."

Mr. Blair told the Confederation of British Industry meeting in Birmingham that Britain has a better chance of withstanding a global economic downturn than the other major industrialized powers.

He spoke as his government published figures Monday showing that industrial output fell by 1.6 percent in September, its biggest monthly decline since May 1992.

British tourism is also in a major slump, hit by the impact of hoof-and-mouth disease earlier this year and a sharp decline in foreign visitors since the September 11 terrorist attacks on the United States.

Adding to the economic uncertainty in Britain is the question of how the government will pay for its contribution to the global fight against terrorism.

The British treasury chief, Chancellor of the Exchequer, Gordon Brown, says income taxes will not be raised, but he might increase other, unspecified taxes.

The treasury spokesman for the opposition Conservative Party, Michael Howard, told British radio the government is going to use the war on terrorism as an excuse to raise taxes.

"I don't think it's got very much to do with the war," he said. "It's been clear for quite some time that there would be a need to increase taxes if government spending plans were to be financed. Government spending is increasing at a much faster rate than the rate at which the economy is growing."

In addressing the business conference, Mr. Blair took a break from an intense round of war-related diplomacy.

On Sunday night, he hosted seven fellow European leaders to discuss the military and humanitarian situation in Afghanistan. Mr. Blair plans to visit Washington on Wednesday to brief President Bush on his trip last week to the Middle East. And on Thursday, Mr. Blair will meet in London with Pakistani leader Pervez Musharraf.