The UK's standing as one of the world's best places to do business is at risk because of skills shortages, a complicated tax regime, poor innovation and oppressive red tape, business experts have warned.
Britain tanks sixth in the league of top business locations but that position is in jeopardy unless the issues are dealt with, a study from accountancy firm Deloitte and Touche warns.
The report claims if the problems are not overcome the UK will slip to 12th place by 2010.
According to the index, which ranks countries based on key drivers of wealth creation, the UK is doing well on enterprise and macroeconomic stability.
A 'pro-risk culture and relatively easy access to capital', Deloitte claims, means the country has a strong supply of new business ideas.
"Low inflation, consistent growth and stable employment provide firms with the security they need to make long-term decisions about their business," the report added.
But when it comes to skills, innovation, tax and regulation, the UK is significantly lower in the rankings.
A large productivity gap with competing nations pushes the country down the skills league, while not enough focus on research and development (R&D) means the UK comes just 12th out of the 25 countries surveyed over innovation.
According to Deloitte, the UK's productivity gap with the US - the survey's best country overall - is around 25% when measured as GDP per employee.
It trails by 11% compared to France and Germany, the UK's major European competitors.
"Recent initiatives by the UK government have gone someway to bolster business optimism and could lead to improvements in the both the innovation, and skills rankings in the next five years," said David Owen, Deloitte partner.
"However, the perception among business leaders is that tax and regulation need to be addressed to sustain and build on the UK's position.
"A greater focus on R&D expenditure and smarter, rather than more, regulation should be a priority."
