British business is stuck in a "low-road" rut, under-investing and competing only by driving down costs and prices, says the Trades Union Congress (TUC).

In its response to Professor Michael Porter’s UK Competitiveness report, 'Shifting to the high road', commissioned by the DTI, the TUC agrees that UK business is building on sand by fighting to do things cheapest, instead of embracing the knowledge economy.

It believes the Government should ignore "red-tape whingers" and act to lift the UK onto a "high-road" economy, in which innovative businesses with well trained and highly skilled staff, provide quality products and services.

The TUC said the report on competitiveness had demolished the argument that British companies were being strangled by red tape, as Britain had one of the least regulated markets for products and labour.

The weak standard of management and businesses’ conservative record, means that fundamental change will not happen without government pressure, it says.

The TUC is calling on the Government to raise the national minimum wage, to raise the supply of – and demand for – skills, and to promote best practice in employee consultation and participation.

"The UK needs a high quality business environment and the Government can start building it now with a number of productivity-driven interventions," said Brendan Barber, TUC General Secretary.

"A knowledge economy will thrive with a well paid and highly skilled workforce, achieved through a higher minimum wage and a properly co-ordinated and used skills training system. But only effective informing and consulting generates the employee trust and empowerment vital to a high performance workplace," she commented.