The CBI has warned the chancellor that the economy, and hundreds of thousands of small businesses, were at risk following changes to capital gains tax announced in the pre-Budget report.

In an open letter to chancellor Alistair Darling, CBI director-general Richard Lambert said the organisation had 'deep concerns' about pans to introduce a flat-rate capital gains tax regime.

'By removing taper relief you have deployed an extremely blunt instrument that will deeply damage a much wider community, and in so doing, risk the medium-term health of our economy,' the letter stated.

Lambert added that the estimated increase in tax take from the changes, £900m, came at a time when companies were considering whether to continue to base themselves in the UK, and the government's own forecasts point to a more uncertain economic climate.

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