More than one in four manufacturers does not export at all, and 82 per cent of industry respondents identified export controls as a barrier to trading overseas.
“Overly zealous export control rules can stand in the way of reasonable trade,” the report states.
It calls on Vince Cable to deliver his pledge to reduce “onerous business taxes, red tape which suffocates small firms, and a slow oppressive planning regime.”
Many small and medium sized businesses say “the needs of big business are taken into account when the government is creating regulation,” harming their own prospects.
And tax credits to encourage research and development (R&D) are unnecessarily complex and too prescriptive, also deterring small, innovative companies, the BCC found.
The UK spends half a per cent less of its GDP on R&D compared to peer countries.
The education system is also failing to provide young people with the necessary skills, the report found.
And banks should be “more adept at serving the specialised needs of manufacturers,” it said.
Yet British manufacturing was the seventh largest in the world in 2009.
Output, productivity and value have increased since the 1980s, despite a fall in employment in the sector.
The UK has “a strong international position in many higher value areas such as pharmaceuticals and aerospace,” the BCC said.
And manufacturing has become the economy’s success story this year. In the third quarter the sector was 5.8 per cent up on the same time in 2009, the government revealed this month.
Yet the industry still “needs to rediscover its trading spirit,” said the BCC’s David Frost.