Tony Blair has urged British companies to step up their investment in Iraq and take advantage of the "enormous opportunity" presented by the country's reconstruction efforts.

The former prime minister, whose highly controversial decision to topple Saddam Hussein came to dominate his tenure in Number 10, said Iraq was set to become one of the fastest growing economies in the world over the next decade.

Foreign investment was essential to rebuilding the country while Iraq's own private sector was still recovering from the state ownership and centralism of the Baathist era, but a "basic problem in terms of perception" was holding back UK firms, he said.

"British business is already invested in Iraq, but there is so much more it can do," he said in a speech to a conference of the Iraq Britain Business Council in Westminster.

Mr Blair said Basra, where the majority of UK forces were based in the years after the 2003 invasion, was especially suitable for British involvement.

"The truth is that Basra has got this enormous programme of investment that is now going forward and one of the reasons for the conference today is to get the message out to British business that this is an enormous opportunity, that we have got very strong links with Basra and we should be there," he said.

Mr Blair, who now works as a peace envoy in the Middle East, acknowledged that the difficulties facing Iraq were "manifest", including terrorism, corruption, lack of infrastructure and political paralysis.

However, he insisted there had also been progress. And he urged people to "see the possibility of Iraq as an economic powerhouse, as it should be, as a cultural icon, as an intellectual and artistic centre, which once it was".

"Keeping the vision of how it achieves that again is what all Iraqis and friends of Iraq should have at the front of their minds and hearts," he said.