Digby Jones said the government needed to cut red tape

The findings, from a study by employers' group the CBI, come as Prime Minister Tony Blair prepares to address the CBI conference.

The survey warned that businesses could shift to cheaper markets if UK competitiveness continues to decline.

The CBI wants the government to act now to prevent jobs and investment from moving abroad.

The business body has also warned that the United States is putting up too many trade barriers.

Getting worse

Britain still fares well in the global competition for investment. According to a new CBI poll, 78% of UK firms believe the country remains an attractive base of operations.

The business vote is up for grabs Digby Jones, CBI

But 70% said that the climate had become markedly worse over the past five years, and three-fifths expected it to worsen further in the next five years.

The CBI said its "deeply worrying" poll laid the blame on the Labour government, for not delivering on promises to create a favourable legislative environment.

Respondents highlighted concerns over tax increases and standards of public services, in particular transport infrastructure.

But by far the biggest complaint was over the volume of bureaucracy: 95% said they spent more time complying with regulations now than five years ago.

Drifting apart

The CBI is still cautious about confronting the government directly: relations with Labour have been cordial for the past five years, and the organisation does not want to provoke a breach.

As well as Tony Blair, a number of government ministers, including Chancellor Gordon Brown, are due to speak at the conference.

But CBI leaders admit that its previous support for the government is wavering.

"The business vote is up for grabs," said Digby Jones, CBI director-general.

Hit-list

The UK government is only one of the CBI's current list of targets. Its most noisy campaign at this year's conference is against what it says is protectionist US trade policy.

British business is particularly vulnerable to any tariff barriers from the US, the CBI said, since it is so heavily involved in the market.

The US has said it disagrees with the ruling and has not indicated whether it will comply with it World trade: At-a-glance guide Steel dispute explained

Keen not to be seen as a narrow lobby group, the CBI also contends that US protectionism has an especially damaging effect on the developing world.

"There is a real danger that America is sliding towards isolationism and protectionism," CBI president Sir John Egan said.

"The rest of the world desperately needs America to stay engaged."

Digby Jones told BBC Radio Five Live that the recent row over steel tariffs was worrying.

"We don't want a full scale trade war," he said.

"We want them (the US) to behave according to the rules and help the world out of its economic slump."

Mr Jones added that a 'Buy American First' policy pursued by some companies could damage the UK.

"That's going to cause unemployment in Britain from what is supposed to be our best friend," he said.