Red tape chokes investment in UK

Britain's growing burden of red tape is hitting its ability to attract inward investors, a firm of City accountants warned yesterday as figures showed investment had slumped this year.

The UK held onto its slot as the top destination in Europe for inward investment despite a 35 per cent fall in new projects, Ernst & Young said. The UK attracted 197 new projects in the first half of this year compared with 303 in the last six months of 2002.

It said much was due to a "sharp drop" in telecom and software investments as the hi-tech bubble burst across the world. But Mark Hughes, a consultant at E&Y, said it was more worrying that the UK's share has suffered a gradual decline from 28 per cent in 1998 to 21 per cent now.

"Far from being a blip, it may exacerbate an existing trend in which the UK's share of European investment drifts towards the UK's 'real' weight in Europe," he said.

He said the UK had lost some its historic advantages like: labour law converging "in the wrong direction" with Europe; telecom liberalisation across Europe making distance less of a barrier; The UK's cost base "not as competitive as it was".

The warning came as the European Parliament strengthened controversial plans to force companies to inform and consult their workers.