Exodus feared as UK companies lose faith

COMPANIES are losing patience with rising levels of taxation and regulation and many are plotting to move overseas with disastrous implications for the economy, the Confederation of British Industry will warn today.

A survey of business chiefs lifted the lid on growing dissatisfaction with an economic environment which they claim is blunting their competitive edge.

The CBI said India and China were increasingly being viewed as better options by firms struggling to recover from the downturn, while the US was also considered more viable.

In the service industry 10 per cent fewer businesses will have their headquarters in the UK in five years time, according to data in the CBI/Deloitte Annual Conference Survey.

However, 12 per cent of the companies polled have not yet decided if they will move their businesses, and the CBI warned the government that it faces a race against time to stop them abandoning the UK. The issues that overshadowed all others were regulation, taxation, infrastructure and planning. The manufacturing sector showed the least confidence in the UK – scoring 27 per cent lower than the average approval rating for other areas of the economy.

While financial services emerged as the most attractive sector for investment at the moment, regulation is threatening to stifle competition, CBI deputy general director John Cridland told City A.M. “The European Parliament is settling scores. Some think that private equity companies were benefiting because they were not being regulated in the same way as public companies.

“However, what they are not accepting is that private equity companies cannot cause a systematic collapse of the system. A firm may fail but it will not bring the whole system down with it. What these regulators are doing is in many ways uncompetitive. There are so many rules and regulations that companies are not able to come up with innovative products.”

Meanwhile the survey shows that businesses at least believe that the coalition government is proving a good listener. More than 60 per cent said they thought it would improve the overall climate for business.

CBI director-general Richard Lambert said: “The atmosphere is positive … we must fire the economy into life. In the past two years we have seen some troubling signs.”

The report was based on findings by Ipsos MORI, which interviewed 121 business chiefs.