Britain is losing investment over 'red tape and taxation'

Investment in the UK could be lost overseas unless the coalition government takes action to tackle problems related to regulation, business taxation and infrastructure, the CBI warned today.

• CBI chief Richard Lambert:"The UK is still perceived to be an attractive place to invest"

A survey of 120 business leaders by the industry group and accountancy heavyweight Deloitte revealed growing anxiety about Britain's competitiveness.

"In a number of areas considered to be critical to investment decisions, the UK performs relatively poorly," the research, unveiled at the CBI's annual conference in London, said.

Other areas where the UK performed better, such as networks surrounding a business, were seen as less important when making big investment decisions by the chief executives and chairmen of FTSE 100 and FTSE 250 companies surveyed. Richard Lambert, director-general of the CBI, said: "The UK is still perceived to be an attractive place to invest compared to many other countries, but is seen to have lost ground in recent years, and as lagging behind the US, China and India."

Lambert warned that in the areas that really mattered to investment decisions, such as levels of business and personal taxation and the nature and level of the country's regulation, the UK's position had been eroded over the past decade.

"The coalition's efforts to improve the general business climate are viewed favourably," he said, "but there is much to do to improve the UK's competitiveness as a destination for investment.

"The stakes are high, but if the UK raises its game, the prize we reap in jobs and opportunities will be considerable."

The CBI/Deloitte survey, which examined likely patterns of investment over the next five years, said respondents put the UK ahead of continental Europe and Russia as a place to invest.

It is on a par with Brazil and Asian countries other than India and China.

According to the report, the coalition government seems to have made a good start, with 62 per cent of industry leaders believing that the new administration will improve the climate for business.

It showed many companies - between 8 and 12 per cent across the sectors - had currently not decided where their primary location would be in five years' time.

"So if the UK sets the right policies now, it can not only maintain its position but it can attract additional activity to the UK," the research said.

However, the survey found that if action was not taken, many would-be investors were more likely to reduce their presence in the UK, particularly "in design, marketing and brand development and services provision, areas traditionally considered strengths of the UK".

Lambert said: "Everyone knows we can't cut our way back to prosperity.We have to focus on areas of growth."

He added that with household and government spending both likely to be squeezed in the next few years "private sector investment and trade will be the twin engines for growth".

Survey respondents also complained of "constraining" corporate tax conditions, the "significant costs" of legislation and the fact that quality of life in Britain "isn't as high as tax levels would suggest it should be".