FTSE 100 chiefs warn Brown over taxes and red tape

Companies could desert Britain unless the Government cuts tax and red tape and boosts investment in R&D and the skills base, some of the UK's best-known chief executives warned yesterday.

The heads of Tesco, GlaxoSmithKline, Vodafone and Diageo said in a globalised world economy, countries such as Britain had to compete for resources.

Sir Terry Leahy, the chief executive of Tesco, said that although half of its retail space was overseas it still needed to have a strong home base. "The UK remains the home for our business but the level of taxes seems to be above our waist. National Insurance and all the other taxes are more than half of our profits."

In a clear message to Gordon Brown, Sir Terry said high taxes imposed to pay for better public services "limited" the ability of a country to attract the very global companies it needed to generate the revenues to pay for those services.

"If the Government wants to foster a global business it must create a competitive market at home and woe betide any government that disregards that," he said. "The Government needs to foster a culture where profitability is not scorned, success does not lead to envy and enterprise in not derided."

Paul Walsh, the chief executive of Diageo, the drinks giant, urged Mr Brown to follow the US in ensuring that the tax system "did not penalise success".

"At the heart of that must be a competitive income tax level that compares favourably with that in other leading industrial nations," he said. "That competitive rate must be bolstered consistently across the tax system."

Jean-Pierre Garnier, the chief executive of GSK, warned that the blurring of national boundaries meant thousands of knowledge-based jobs would follow the waves of manufacturing and back-office posts to be relocated to nations such as India and China. "Geography is history," he said.

Mr Garnier added that the UK needed to better exploit its scientific research base, pointing out that while nanotechnology was developed in Britain hardly any of the 900 companies developing it commercially were in the UK. And he lashed out at the European Union, saying: "Layers upon layers of regulations from Brussels have a danger of suffocating companies."

Mr Walsh warned that when considering where to locate, businesses looked at where their consumers and the workers were and whether its product would be able to compete in a world market. "There will be no long-term guarantees that newly arrived businesses will stay put together," he said.

In the past few weeks, two major overseas investors ­ Samsung and LG Phillips Displays ­ announced they were cutting jobs at their UK operations.

Arun Sarin, the head of Vodafone, told the audience of business leaders: "Government and regulatory action, however well intentioned, can limit our ability to serve our customers."

In his speech, the Chancellor agreed that Britain had to do more to reward and encourage investment. "I promise we will continue to look with you at the business tax regime so that we provide incentives for investment in wealth creation and greater rewards for success ­ and make and keep the UK as the best place for international business."