Muslims are in danger of "withdrawing" from society, one of Britain's most senior black figures has warned.
Bill Morris, now Lord Morris, the former trade union leader who made Birmingham his home after emigrating from Jamaica, said an "equilibrium" on race and immigration had been destroyed.
In a wide-ranging interview with The Birmingham Post, he said:
* Britain had "let the ball slip" when it came to race relations.
* There was a danger of Muslims "withdrawing" from society because they felt targeted.
* Industry was failing to make the most of a diverse workforce.
* There was a need to accept a person could be British and also have another identity.
Referring to his own background, he said: "I am a Jamaican, and I am proud to be a Jamaican, but by God I'm very proud to be British."
Lord Morris said: "We had reached a sort of settlement within the nation where stability was established, on the basis of multi-culturalism, on the basis of diversity, and on the principle of participation but also respect for each others culture.
"And I think that what has destroyed the equilibrium was 9/11, the rise of political parties on the fringes, and of course the problems generated outside the borders of the United Kingdom."
The Labour peer, who joined the House of Lords this year as Lord Morris of Handsworth, was general secretary of the Transport and General Workers' Union for 11 years.
He was the first black leader of a major trade union, and one of the first high-profile black figures in public life.
Originally from Jamaica, he moved to Handsworth in 1954 and now has homes in London and Shropshire.
Lord Morris was also one of the first commissioners appointed to the Commission for Racial Equality, when it was created 30 years ago.
He spoke out after the chairman of the Commission for Racial Equality issued a series of controversial warnings about increasing tensions.
Trevor Phillips warned that Britain was facing a "real crisis" because of growing ethnic segregation.
David Cameron, the Conservative leader, also warned recently that Britain's inner cities were experiencing "ghettoisation".
Lord Morris said he was concerned ethnic minority communities were concentrated in a few towns and cities such as Birmingham.
But he warned against "blaming the victim" and said black and Asian people were pushed to live in specific places through economic and social pressures.
Lord Morris also warned that industry was still failing to make the most of Britain's diverse workforce – and losing money as a result.
"What we are missing is the real opportunity to expand recruitment potential, to expand client bases and to ensure that the ambassadorial advantages of an ethnically diverse workforce are materialised."
Businesses could improve their chance of making sales in the global marketplace if they made better use of ethnic minority staff, he said.
"You have to be very short-sighted to send an all-white middle aged sales team to Africa to try to sell them services or try to develop business opportunities."
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