The UK is lagging behind the world’s other advanced economies in the shift to robots and automation in the workplace – putting jobs, businesses and the prosperity of whole regions at risk, according to an influential group of MPs.

MPs on the business, energy and industrial strategy (BEIS) committee said UK firms were losing out to competitors in the rest of the G7 after the government cut support for companies and failed to encourage investment.

Automation of industries from retail to manufacturing promises to revolutionise how businesses operate but also raises the threat of huge job losses as robots replace people in some functions in factories and warehouses, and driverless vehicles displace humans in many tasks.

Q&A What is productivity and why does it matter? Show Hide Productivity is an economic measure of the efficiency of a workforce. It typically measures the level of output per hour of work, or per worker. A more productive workforce signals stronger growth and healthier public finances. Productivity gains are vital to economic prosperity because it signals that more is being achieved by workers in less time. Gains are typically achieved through advances in technology and increased skill levels within a workforce. In the UK, productivity growth has stalled since the financial crisis, putting it behind international rivals. The UK ranks fifth out of G7 leading industrial nations, with Canada and Japan having weaker levels of productivity. Germany is the most productive nation per hour, while the US is top for output per worker. Weak productivity is problematic because it signals weaker economic growth, therefore eroding the public finances. Without an improvement in productivity, economies miss out on increases in wages and living standards, putting further pressure on the welfare system and depressing tax receipts. Some industries are more productive than others. In the UK, manufacturing firms are among the most efficient, whereas the services sector operate at below average productivity. Photograph: Bloomberg

However, the committee said automation was on its way and that Britain needed to change – with investment in skills and training suited to the so-called “fourth industrial revolution” – or be left behind.

In 2015, the UK had 10 robots for every million hours worked, compared with 131 in the US, 133 in Germany and 167 in Japan. By 2017, the UK represented just 0.6% of industrial robotics shipments.

Rachel Reeves, the Labour MP who chairs the committee, said: “The real danger for the UK economy and for future jobs growth is not that we have too many robots in the workplace but that we have too few. The government has failed to provide the leadership needed to help drive investment in automation and robot technologies.

“If we are to reap the potential benefits in the future of improved living standards, more fulfilling work, and the four-day working week, the government needs to do more to support British businesses and universities to collaborate and innovate.”

The cross-party committee’s report, Automation and the Future of Work, criticised the government for scrapping its Manufacturing Advisory Service in 2015. MPs said the closure made it harder for companies, and especially smaller businesses, to get help and advice on how to automate. The government has also not done enough to encourage research and investment, it added.

Sign up to the daily Business Today email or follow Guardian Business on Twitter at @BusinessDesk

Official figures have shown that women, workers with few qualifications and former industrial regions are most at risk of falling behind as automation spreads. The committee criticised the government for a worrying lack of planning to deal with the impact on these groups. It called for a national retraining programme and financial incentives for companies to invest in workers.

The MPs rejected the idea of a “robot tax” to fund support for displaced workers and other forms of employment, arguing it would discourage take-up of automation. Instead the government should use the tax system to encourage investment in automation.

Reeves said Brexit had contributed to the UK’s slow adoption of automation by suppressing business investment. She said leaving the EU could make it harder for UK universities to cooperate with European universities in developing technology and discourage talented engineers from working in Britain.