The call for a radical overhal came as the annual roads maintenance survey revealed Britain’s roads are deteriorating despite councils fixing more than two million potholes.

The Asphalt Industry Alliance is now calling for Government to switch to longer-term funding mechanisms, allowing councils to move from one-year costly cycles of highly reactive work to planned, preventative maintenance programmes.

Local authorities in England and Wales spent £113m on filling 2.2m potholes, but the state of the network has got worse. This is despite a 30% increase in potholes filled.

According to the 18th Annual Local Authority Road Maintenance Survey, councils  paid out 50% more last year than the previous year in compensation claims from road users for damage or injury due to poor road condition.

Over the year £32m was paid out in compensation claims and the cost of staff time spent on claims amounted to over £13m.

This year, local authorities in England report a shortfall in their annual budgets of £829m.

Across England and Wales, authorities estimate that £10.5bn would be needed to bring their roads back into reasonable condition.

“Constantly having to patch up crumbling roads rather than using highway engineers’ skills properly, to ensure good road condition in a planned and cost effective way, is nonsensical and costly to the country,” says AIA Chairman, Alan Mackenzie.

“The DfT’s Potholes Review was a welcome initiative and concluded that ‘prevention is better than cure’.

“When you add up all the costs incurred by not following this advice, it’s hard to understand why central Government cannot find a way to invest in this much needed work and save on higher costs in the future.”

One in five local roads is reported as being in “poor condition”, which is defined as having five years or less life remaining.

The longer remedial work is delayed the more its cost increases.

Poor local road condition is costing the country’s small and medium-sized businesses a cumulative £52bn a year in various ways such as reduced productivity, increased fuel consumption, damage to vehicles, and delayed deliveries.

The 59% of ALARM respondents whose roads were damaged as a result of the extreme rainfall in 2012, estimated the total cost of their repairs at £338m.

Extreme weather has a disproportionate effect on roads that are not kept in good condition and water is particularly damaging to the lower, structural layers of the road.

“Emergency funding from Government is welcome, but a little extra here and there makes very little difference,” says Mackenzie.

“The additional £215m announced in the autumn to help improve local road condition over the next couple of years doesn’t even cover the £338m of damage repair needed as a result of last year’s rainfall.

“It’s time to stop the rot. The Government needs to make sufficient funding available now that will enable local authorities to get their roads back into a condition that will quickly and directly boost the economy, help businesses and improve local communities.”

A survey carried out by the AA of more than 22,000 people has revealed that in the last two years a third of AA members have suffered pothole damage to their cars

The local roads in Scotland and Yorkshire and Humberside were rated as the worst in Britain by those taking part in the AA Populus poll, with 40 per cent rated as being in poor, very poor or terrible condition.

Northern Ireland, Wales and London were revealed to have the best roads. However, 50% of all respondents said that the pothole problem had grown in the last 12 months.

John Wilkinson, managing director May Gurney Public Sector Services, said: “An efficient, well-maintained road network is an essential building block for UK growth and economic development – but local authorities are stuck between a rock and a hard-place when it comes to maintaining road surfaces.

“Having already seen budget reductions of 28%, they now face an additional 19% a year in funding cuts by 2014.

“Despite this incredibly challenging environment local authorities have, according to figures from the Asphalt Industry Alliance, managed to repair 500,000 more potholes than they did last year – mainly by pioneering new ways of working with private sector specialists to stream-line repair and maintenance programmes.

“There comes a point when the Government has to recognize that the 250,000 km of roads that local authorities’ are responsible for cannot be maintained without more money. I think we are rapidly getting to that point.”