The UK’s ability to attract business investment is being hampered by regulation, taxation and low levels of skills, according to the CBI.
The employers’ group wants the Government to act in order to bolster the country’s position in the world as a compelling destination for inward international investment.
Failure to do so could see jobs lost to other countries, the CBI warned.
As part of its report on improving the UK’s standing as a business centre, the CBI highlighted the fact that foreign investment in the UK fell significantly during the global recession, from $186.4 billion in 2007 to $45.7 billion in 2009.
The group also identified those areas where the UK was strong and where improvements need to be made to pull in new investment.
The study polled some 400 companies in its research.
When asked about the advantages of investing in the UK, business leaders cited the country’s science base, particularly in research and development, and innovation, highlighting that four of the world’s top ten universities are located in the UK.
English also makes the UK attractive to overseas businesses looking to enter the European market but struggling with the barrier of working in multiple languages. As does the country’s political and business stability.
However, the report singled out a number of barriers to investment.
These included a lack of long-term predictability and certainty, with some companies worried that elections see shifts in policy and direction; the 50p personal tax rate, which makes it harder to attract and retain talent; skills shortages, particularly in science, technology and maths, that affect a wide range of sectors from manufacturing and engineering to the creative industries; the inability of the planning system to deliver timely decisions; and the impact of regulation, especially in the area of employment.
The CBI set out a series of proposals aimed at dealing with those weaknesses.
The Government should stimulate new market activity by opening up public services to private provision, by speeding the change to a low-carbon economy, and by improving the availability of high-speed broadband.
On tax, there needs to be a long-term objective of reducing the main rate of corporation tax to as low as 18 per cent.
Other business taxes need to be made more competitive, particularly employment taxes, fuel duty, low carbon taxes and business rates. The personal 50p tax rate should be dropped as soon as the public finances allow and within the lifetime of this Parliament.
SMEs, the report continued, require capital to grow, and this could be managed through a range of tax changes and more effective use of public procurement.
To boost skill levels, there need to be more business-led academies and apprenticeships.
More, too, must be done to add greater resilience to the UK’s infrastructure, and a planning and regulatory system should be established that helps encourage investment.
John Cridland, the CBI’s director-general, said: “We want the UK to be the best place for companies to invest because this is how we will create growth and jobs. But it is worrying how many business leaders are telling us that the UK no longer holds the same attraction it once did and are questioning whether they need to be here at all.
“With competition for international capital so fierce, the Government must play up our strengths and remove the stumbling blocks to investment. Time isn’t on our side and we have less than five years to turn things around.”
Mr Cridland added: “In 20 years’ time, we want the UK to have the most competitive tax regime in the OECD, be a world leader in low-carbon technologies, boast a strong education and skills base, fit for purpose infrastructure and the fastest broadband in Europe.
“This is within our grasp, but we need to act quickly to prevent this opportunity slipping through our fingers.”