Lord Bilimoria questioned how the UK can experience growth when it hiked taxes “to the highest level in 80 years”.
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The chair of the International Chamber of Commerce told LBC that UK businesses are suffering and putting off investment as a result of the nation’s “political instability”.
Lord Karan Bilimoria said Britain’s prospects of attracting global capital tick all the boxes, apart from the current situation in the Commons, with turmoil surrounding Sir Keir Starmer’s position as Prime Minister.
Speaking to Shelagh Fogarty on LBC, Lord Bilimoria questioned how the UK can experience growth “when you put up taxes to the highest level in 80 years”.
Asked what he was hearing from businesses, he said: “What is absolutely required for business is stability, and look at the position that we’re in.
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“I hate this talk of Britain being referred to as a middle power. We’re actually a great country. We’re still the sixth largest economy in the world with less than 1% of the world’s population.
“We are one of the top two investment destinations as a country in the world. And when people look to invest in a country, they look for a few things.
“Does it have a good rule of law? We have fantastic rule of law. Does it have an independent judiciary? We have an independent judiciary.
“Does it have an independent central bank? We have an independent central bank. Does it have robust democracy? We have robust democracy.
“Does it have political stability? We don’t have political stability, so this is affecting us in terms of the impression as a country and from investment prospects and from businesses point of view.”
He added: “What a situation to have political instability, when you have a government less than two years ago that was elected with a 170-seat majority, more than double Boris Johnson’s landslide victory when he became prime minister and had an election.
“This is what you get after a 170-seat majority.”
The warning comes as leaders of some of the UK’s largest companies also expressed alarm at the Westminster chaos.
The pound plummeted as much as 0.4% against the US dollar on Friday, before settling around 0.3% lower at 1.336 US dollars.
One FTSE 100 chief executive claimed that the government had, over the past week, “myopically focused on its own infighting and scandals, rather than focusing on the long-awaited action it should be delivering”.
Responding to the question whether or not businesses are being put off investing because of the instability, Lord Bilimoria, also founder of Cobra Beer, said: “Politically, of course it affects businesses.
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“On top of the previous government putting up taxes to the highest level when they left office, this government has come in and has continued to put up taxes.
“They speak of growth, very well intentioned. How can you have growth when you put up taxes to the highest level in 80 years and when you have public spending at its highest level.
“You’ve got to have spending being reduced and you’ve got to have taxes actually reduced to generate the growth that this economy needs and deserves.
“On top of that we now have unemployment that has been rising.
“We’ve got inflation that is still relatively under control, it’s well over the 2% target, but it’s not in the where we had inflation going up to 11% at one stage, and we’ve got the most expensive energy costs in Europe by far.
“All this creates a very challenging time for business, including the hospitality industry, which has really suffered.”