Only one in five UK employers offers staff the option of remote working - half the proportion of businesses in Germany, Sweden and Denmark, research by the Equal Opportunities Commission (EOC) has found.
The EOC also found that the percentage of companies offering flexible working hours in Germany and Sweden, where 90 percent of firms had flexitime schemes, was also almost double the UK rate of 48 percent.
The findings come despite new laws that are expected to increase demands for remote and flexible working. The 2006 Work and Families Act, which came into force in April, gives people who care for adults similar rights to flexible working as those introduced for parents of young children in 2003.
Industry leaders urged UK businesses to act to prevent the UK lagging behind its competitors. Sir Digby Jones, UK Skills Envoy and former director general of the CBI, said: "The nature of work is changing, and UK business needs to come out of the dark ages and realise that it cannot continue to use working practices that originate from the 19th century.
"It needs to modernise, change its approach, retrain its management, and understand the benefits of new smarter working practices."
Trade organisation, Work Wise UK, said the findings reinforced its call for the UK to adopt new innovative smarter working practices. Chief executive Phil Flaxton said: "Although there has been progress in the adoption of innovative working styles, this report highlights we have a long way to go."
Flaxton said: "There are numerous reports indicating the UK's poor productivity compared with competitors. This is a wake up call to employers who if they continue current archaic nine-to-five working practices, will not only miss out on productivity gains, but risk government legislation."
Earlier this year, the Institute of Directors set an example with its own roll-out of secure remote working technology to allow more flexible working - and ensure business continuity.