The CBI has called for a radical rethink of England's school system, including the abolition of GCSEs at 16 and a break from the "exams factory" of the national curriculum and league tables.
The report found that raising educational attainment to the levels of the best in Europe could boost GDP by more than £8 trillion over the lifetime of a child born today, the equivalent of one percentage point a year on growth.
It claims that few other changes could make such a powerful difference to the long-term health of our economy.
The report First steps: a new approach for our schools found that between 2000 and 2009, the UK slipped from 4th to 16th in science, from 8th to 28th in maths and from 7th to 25th in reading in international league tables.
John Cridland, CBI director-general said: "Getting the next generation on the escalator to achieve their potential is one of the most exciting challenges we face.
"Businesses have traditionally focused on education at 14-plus, but it's clear we need to tackle problems earlier, instead of applying a sticking plaster later on."
"Qualifications are important, but we also need people who have self-discipline and serve customers well."
Cridland added: "Government reforms are heading in the right direction, but are not sufficient on their own and must go further and faster. As well as academic rigour, we need schools to produce rounded and grounded young people who have the skills and behaviours that businesses want."
Stephen Twigg, the shadow education secretary, said: "This report suggests that the Government's planned EBacc certificates are the wrong approach. When business leaders say his approach to education is wrong, Michael Gove looks seriously out of touch."
On Tuesday 27 November HR magazine will be hosting a live lunchtime debate web TV show on the UK skills gap.
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