Government inaction dressed up as action and "lashings" of regulation is damaging British manufacturing industry, an audience in Birmingham heard last night.

Jon Moulton, managing partner of venture capital firm Alchemy Partners, said much of the regulation coming from Whitehall and Brussels was deterring overseas investors.

It was also encouraging a feeling of inertia among bosses who did not want to risk recruiting more people as jobs in the sector have dropped from five million to three million employees in the last 15 years.

Speaking at the CBI Manufacturing Dinner at the International Convention Centre, Mr Moulton said the decline risked Britain becoming solely dependent on financial services and tourism.

"Government policy has not changed much since the 1960s. They are still saying the same things, but failing to achieve them, and they keep lashing us with regulation.

"Senior management is now spending time worrying about things it does not want to. It is making it harder to employ people in the UK and more expensive. Companies are either not coming here because of the weight of regulation or not taking on more people because of all the employment law they will have to deal with.

"In reality if we are going to pay our people higher and subject them to all these various regulations, and we are competing with people who are cheaper and don't have paternity leave and other things, you don't have to be an economic genius to work out where the country is going to be after that.

"Manufacturing is difficult enough to work in, but this stuff means we are shooting ourselves in the foot."

Mr Moulton said regulation had gone too far - it was anti employer and anti business.

"Some of it is needed, but not the thousands and thousands of pages we are getting. In my sector, financial services, the regulations are lethal.

"If you have a choice between the bureaucratic nightmare in the UK with 23 different forms and dealing with one person from Chicago, I know where most people are going to go."

Mr Moulton said manufacturing was absolutely vital to the wealth of the UK, and reducing regulation was one relatively simple thing which could be done to help it.

He advocated the removal of much of it, although not the introduction of another deregulation taskforce.

"All that has achieved is doing away with the dog licence and little else. We needed to have a look at what is happening in US states and have more legislation with five or ten year life on it.

"That way regulation which nobody cares about can be quietly dropped."

Mr Moulton said also took a swipe at all the various government bodies set up to help manufacturing.

"The Government has allowed a lot of the manufacturing sector to decline.

"There has been a mixture of inaction and intending action, but not delivering; instead doing things like setting up committees.

"There are a huge amount of bodies involved in manufacturing, but they overlap each other hopelessly and many of them are too small.

"It is easy to come up with a name and four blokes, but the current situation is too complicated to help very much.

"We have the Welsh Development Agency competing with Advantage West Midlands or Yorkshire Forward.

"That is not very productive, and even duplicate effort. They achieve very little. They have had very few successes and wasted lots of money."

Meanwhile diversity and inclusivity in the workplace was not necessarily a good thing, he added.

"Diversity is not always good. An extreme example would be a if you have a team of commandos going into battle - you need them to be able to speak the same language and know how they are going to behave.

"Quite a lot of businesses in the UK are made up of people from the same backgrounds so they understand each other more. The idea that filling a department up with 15 people of different ages, sexes and backgrounds is going to work is not the case."