BUSINESS leaders have hit out at David Cameron’s decision to make Scottish entrepreneur Michelle Mone a peer, branding the decision ludicrous and bad for the country.

The Glasgow-born businesswoman said she was "honoured and humbled" after Downing Street confirmed that she was to be one of 45 new members of the House of Lords.

Her name was included on the list despite controversy in recent weeks over her new role as a government advisor.

No 10 described Ms Mone, who founded lingerie brand Ultimo, as "one of the UK's leading entrepreneurs (who) sits on the Board of Directors for The Prince’s Scottish Youth Business Trust".

It added that she "plays an active role in mentoring programmes, with a particular emphasis on encouraging entrepreneurship in the young".

Ms Mone tweeted: "I promise to work V hard for our country. This one is for you Mum and Dad." She followed her message with the hashtag #LadyM.

However, Douglas Anderson, of major tool and plant hire company the Gap Group, said that he was “disappointed” to hear that David Cameron had made Ms Mone a peer.

“Unfortunately the Prime Minister appears to have decided that he could not back down on this issue without losing face. That is disappointing."

He added: "This is not good for the country, this is not good for the Union, this is not good for business and this is not good for the House of Lords.

“The only person that I can think that this is good for is Michelle Mone."

Mr Anderson has described Ms Mone as a "a small-time businesswoman with PR exposure far in excess of any success".

He and other business leaders have questioned what qualifies her to lead a review into boosting the number of business start-ups in poor areas.

There was also controversy when it emerged her company had used a tax avoidance scheme - employee benefit trusts (EBTs) – once described as “morally repugnant” by the Chancellor George Osborne.

Mr Anderson added: “Business people in Scotland will think ‘here we go again’. That this London-centric government does not care what we in Scotland think. It will drive the country apart."

John Pirrie, a partner in the private equity firm Nevis Capital, said he was “flabbergasted” by the announcement, adding that he suspected that Ms Mone’s pro-union stance in the run-up to the referendum may have contributed to the appointment.

He added: “I think there are more deserving people and people that would be a lot better at the job.

“I think it seems political, going back to her making a bit of noise during the referendum campaign, but I’ve no idea. I just think it’s ludicrous.”

A spokesman for Ms Mone last night said: “No comment.”

Mr Cameron has also come under fire amid accusations that he had given peerages to cronies and Tory donors..

Among those elevated to the Lords include former Tory MP Douglas Hogg, infamous for trying to claim for moat cleaning on his Commons expenses.

Another controversial name is David Willettts, who once accused Scots of having their "snout in the trough" of public spending.

There was also a peerage for former Labour chancellor and Better Together boss Alistair Darling.

Ex-Lib Dem leader Sir Menzies Campbell and Sir Malcolm Bruce, the former Lib Dem MP for Gordon, will join him in the Lords.

Danny Alexander, the former Lib Dem chief secretary to the Treasury, was given a knighthood.