High corporation tax levels are forcing an increasing number of multi-national firms out of the UK, business leaders' body the CBI has claimed.
Mr Lambert said business tax needed to be reduced
CBI chief Richard Lambert said the UK was less competitive because other European states had lower business tax.
He said the 30% corporation tax in the UK compared unfavourably with the 12.5% rate in the Republic of Ireland.
"Either companies will generate more revenue outside the UK or corporation tax has to come down," Mr Lambert said.
"A trickle of companies are relocating and our anxiety is that it does not turn into a flood."
The CBI's director-general also said the fact HM Revenue & Customs was aggressively pursuing business taxes was compounding the problem.
Mr Lambert highlighted the issue to mark his 100th day as the head of the CBI.
"Compared to the rest of Europe the burden of taxation is rising in the UK at the same time as tax collection has become noticeably more aggressive," he said.
The CBI also called on the government to try and get better value for money for the £150bn spent on goodsand services by the public sector.
The CBI said civil servants were often too inexperienced to make proper decisions on which products to buy, which leads to project delays and extra costs for taxpayers.
"Taxpayers pay dearly when procurement is bureaucratic and categorised by delays and changing specifications," said chairman of the CBI's public services board Kevin Beeston.