CBI warns of decline in British competitiveness

(Bloomberg)

Business leaders will issue a fresh warning today about Britain's competitiveness, releasing a survey of leading executives which suggests that the country is slipping behind its international rivals.

The UK is performing poorly – and getting worse – in the areas of regulation, business taxation, personal taxation and planning and infrastructure, all of which are critical to investment decisions, the Confederation of British Industry (CBI) will argue. It will use the results to urge the Government to "adapt and improve its policies to recognise the concerns of investors".

"The UK is facing increasing competition as a destination for business investment and although it is starting from a strong base, will need to work hard if it is to maintain its position," the CBI will say. It has found that firms with UK headquarters are among those seeking to shift investment abroad, although those with overseas headquarters are more likely to maintain their investments.

The CBI/Deloitte survey, conducted by polling company Ipsos Mori, questioned 121 business leaders from FTSE-100 and FTSE-250 companies and foreign equivalents operating here. The warning comes as the CBI prepares to open its annual conference.

The one factor seen as important by business leaders against which the UK performs well is economic stability. Other areas where Britain rates highly include historical legacy, such as existing investment and networks surrounding a business. These, however, are rated as less important overall.

Evidence about trends in future investment shows that, if action is not taken, investors will likely reduce their presence in the UK, the survey also warns. This is particularly the case in design, marketing, brand development and services provision, all traditionally considered to be strengths.

But the CBI will say that, based on the survey, Britain cannot simply maintain its position – but it can attract additional activity if the right policies are set now.

It will also claim that the Coalition "seems to have made a promising start", with 62 per cent of respondents saying they believe the new government will improve the overall climate for business.

Respondents put the UK ahead of continental Europe and Russia as a place to invest, and on a par with Brazil and Asian countries other than India and China. However, Britain is seen as less attractive than North America, China and India.

Richard Lambert, the CBI director-general, said: "Having acted fast to tackle the deficit, the Government must now focus on how to attract more investment to the UK, if we are to create new jobs and grow the economy.

"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. The UK needs to improve in the areas that really matter, otherwise other nations will steal a march."

John Connolly, the chief executive and senior partner of Deloitte, said: "If the UK economy is to continue its recovery, then growth and jobs will have to come from the private sector. The Government has to focus its efforts on helping business deliver the maximum power to drive the recovery forward."

The CBI/Deloitte survey forms the first stage of research into the suitability of the UK as a place to invest.