A focus on short term profits is holding back companies from creating greater economic and societal value worth £130 billion, according to a new report.

Shareholder fragmentation along with idiosyncratic legal and regulatory systems also contribute to the UK business ecosystem working against the creation of "purposeful" companies, says the Big Innovation Centre report.

The report, published today by a taskforce established by Big Innovation Centre and supported by the Bank of England, states that if the pursuit of "visionary purpose" is put at the heart of British business an additional £130bn a year could be added to British company valuations.

The report claims that UK companies are currently inadequately organised to unite clear corporate purposes with the common goals and values of their stakeholders.

The authors said companies that have a clear, identifiable purpose are proven to innovate, invest, serve customers and engage employees better than those that do not. The report said that financial markets systematically underestimate the value of investments that purposeful companies make in intangible areas, such as knowledge and skills.

Research and development at UK businesses is static and below the international average, which leaves the country at risk of becoming “an economic backwater”, the report said.

The report lists 20 options for reform, including restricting the rights of short term shareholders in takeovers; relaxing disclosure rules to encourage block holding; better company reporting of intangibles; redesigning executive pay to reward long term purposeful strategies; and tax changes to reverse the decline in equity ownership, including creating a British sovereign wealth fund.

Commenting on the report Andy Haldane, Taskforce member and chief economist of the Bank of England said: “The evidence assembled in this report points the way to rethinking and re-orienting the very purpose of a modern day company, so laying the foundation for a new wave of investment and innovation”.