Large companies are growing increasingly disillusioned with the UK as an business location, with one in five considering relocating their headquarters out of the country because of high taxes and the burden of regulation.
A new survey of FTSE 350 companies and their equivalents from foreign-owned companies by employers' group the CBI has revealed that seven out of 10 business leaders believe the UK is a poorer international business location than in 2001, while three-quarters say the corporate tax regime is worse.
Almost all are concerned with the increased complexity of the tax system, and the demands of compliance, as well as the rate of corporate tax compared internationally.
As a result, 19 per cent of the companies surveyed said they are considering moving their headquarters out of the UK and five per cent have already done so.
In the past few months, two Lloyd's of London insurance syndicates have quit London for Bermuda, citing high tax rates as the main reason, while global banking giant HSBC has publicly said that it is considering moving its headquarters due to the burden of UK tax and regulation, saving itself some £400 million per year in the process.
Other companies such as Google, Yahoo and Amazon established their HQs in thriving Irish capital, Dublin, with a corporation tax rate of 12.5 per cent compared to the UK's 30 per cent.
Meanwhile, a fifth of UK firms have relocated some activities overseas, with financial back office services the most common. Another third are considering doing so.
Richard Lambert, CBI Director-General, said: "In today's world of global markets, companies have many more choices to make about where to invest their capital and their talent than they did in the past. Business tax is one of the most important considerations that firms have to take into account, and it is easily measured.
"Our survey shows that business leaders believe the UK's corporate tax regime is more burdensome than it was five years ago, and that this is making the UK less attractive as an international business location."
Two-thirds of the chairmen, chief executives and board directors surveyed for the CBI said they were dissatisfied with the government's overall approach to tax and international competitiveness, and more than three-quarters said it does not adequately consider the latter when making tax changes.
Almost all believe the Government does not give sufficient thought to the compliance burden and three-quarters think it does not understand how tax features in corporate decision-making.
A quarter think the UK business tax system is now worse than other EU states with only 17 per cent preferring it. But significantly, the USA is not, on balance, deemed to be as favourable a location as the UK.
The key areas of concern to business to emerge from the survey are the complexity of the corporate tax regime; the cost and burden of complying with the demands of the newly-created HMRC; and the rate of corporation tax which has slipped from 10th best in the OECD in 2000 to 18th in 2005.
With Ireland and the Netherlands regarded by those surveyed as the most business-friendly locations in Europe, Richard Lambert said that the worry was that the UK's position relative to other developed economies would deteriorate further over the next two or three years.
To halt this decline, the CBI called on the government to cut £8 billion from the corporate tax bill over five years, saving that could be achieved simply from the more efficient delivery of government services.
"No one expects a dramatic overnight shift - rolling back the tax burden, like turning an oil tanker, will take time," Mr Lambert added.
"However, business needs a clear signal that the UK is going to shift course, first by checking the trend to a more burdensome business tax regime, and then by moving back up the competitiveness league tables.
"It is important to be absolutely clear about who pays for high business taxes. They fall on consumers, in the form of the higher prices that companies need to pay their increased costs. They fall on shareholders, large numbers of whom represent the interests of pensioners and savers. And they fall on the workforce, in the form of fewer jobs, squeezed wages, and lower business investment.
"High business taxes are not a way of making 'fat cats' squeal. They are a burden carried by the whole of society."