The Confederation of British Industry will today issue a stark warning that government failure to improve the transport system is 'tarnishing' the UK's reputation as a place to do business.
The report says over 85 per cent of senior business people believe investment decisions are influenced by the quality of transport, while almost 70 per cent consider the UK transport system to be poor.
The CBI praises the UK's strong international air and sea links but warns capacity is reaching breaking point, with improvements hampered by slow decision-making.
It says all leading economies struggle to deliver infrastructure projects and ease congestion, but UK roads are the most packed in Europe and UK railways are less reliable than many other competitors.
The report cites statistics showing UK commuters are most likely to encounter congestion on the drive to work. Nineteen per cent of UK drivers experience congestion on a routine basis, compared with seven per cent in France and four per cent in Germany.
Road congestion costs up to £20bn each year but the government has conceded that congestion will not be reduced by its 10-year transport plan before 2010.
Competitor countries have improved their road networks at a faster pace. Over the past 30 years, the UK has doubled its motorway network, but the French network has increased by over four times.
In addition, businesses moving freight by road in the UK face higher direct costs than European competitors - more than twice as much as firms in the Netherlands, for example. The past success of UK logistics operators in finding ways of containing these costs is now being threatened by growing congestion.
UK rail reliability is bettered by every major competitor surveyed other than the Netherlands. Eighty three per cent rail reliability in the UK compares with 93 per cent in the US and 91 per cent in France and Germany.
John Cridland, CBI deputy director general, said: 'The legacy of under investment in transport by successive governments is well known, but transport has been a thorn in the side of the UK economy for too long. The existing system has been pushed to breaking point. Despite completion of some individual schemes, we have not made enough progress expanding capacity and encouraging more efficient use of our infrastructure.
'I accept that infrastructure projects take time to deliver, but progress is painfully slow. Meanwhile our competitors are pressing home their advantage. France is leading the way with its high-speed TGV rail network while the UK faces a 4,000-mile rail-replacement backlog.'
The UK has strong sea and airport links, supporting international trade worth £557bn in 2002, over half of total UK GDP. Despite this, international sea and air ports are being held back by slow decision-making, threatening links with emerging markets in the Far East and Eastern Europe.
Heathrow is the only major European airport to have seen a fall in the number of destinations served over the past ten years, a decline that will continue without an additional runway. UK ports could run out of capacity in three to five years unless decisions on expansion are taken now.
Mr Cridland said: 'If the government does not invest in the UK transport system, international companies will not invest in the UK. Ministers must ensure money is spent wisely, implementing projects that deliver real improvements on budget and on time.'
On safety the UK performs well. The CBI praises the excellent record on road safety, with fewer people killed on UK roads than in the five competitor counties featured in the report. The UK's rail accident rate is in line with the safest networks in Europe.
The report calls on the government to improve the planning process to speed up delivery and to increase long-term transport investment.
* 'Is transport holding the UK back?' is the latest study in the CBI series, 'The UK as a place to do business'. Copies are available from CBI Publications Sales: 020 7395 8071. email@example.com. CBI members £20, non-members £40.