Dearth of English-language school centres in Hong Kong is scathing expatriate families and ruining the city's repute as a regional business hub concur parents and lobby groups.
The situation is driving some companies to look at alternatives such as Singapore, Bangkok and Shanghai, they say.
International chambers of commerce have united to pressure the semi-autonomous Chinese's territory to wake up to the problem, but say their pleas for action have fallen on deaf ears.
"There is no space and no flexibility for families like ours. It's a big sacrifice on my family's part ... to come to Hong Kong," said a recently arrived American businessman and father-of-two, requesting anonymity.
"All we as parents are concerned with coming to Hong Kong is will any school accept our children? A lot of firms have decided to go to other cities in Asia where school accessibility is easier. Hong Kong is losing out."
Hong Kong had the dubious distinction of making assignment services firm Brookfield Global Relocation's Top 20 list of most challenging destinations for the first time last year, with schooling cited as the major problem.
"This continues to be the number one burning issue that (foreign companies) are facing in growing their businesses out here," in Hong Kong, said Janet de Silva, the American Chamber of Commerce's (AmCham) education affairs group chairwoman.
Immigration department figures show the number of US and UK passport holders issued with Hong Kong employment visas increased 42.48 percent from 2009 to 2011, as more people are drawn to the city as a gateway to the Chinese market.
But the former British colony's English-language schools have struggled to keep up with the demand due to land shortages, red tape and funding problems.
School waiting lists typically contain up to 100 names, and only two state-funded English-language schools had any spare spaces at the start of this year, according to school data and relocation specialists.
The government cut its annual subsidy for the English-language school system (ESF) after Hong Kong reverted to Chinese rule in 1997. It has been frozen at HK$284 million (US$37 million) for 11 years.
ESF figures show applications for Year One places at the foundation's schools across the territory have leapt 76 percent since 2006-07 to more than double the 1,020 available places -- an amount that has remained flat over that period.
Horror stories abound of distraught parents fighting to get their little ones into appropriate schools. Home schooling is a growth industry, while relocation companies are branching out into school placement.
Shaila Gidwani of moving firm Crown Relocations says one of her British clients was "totally panicking" because his twins could not get into British international schools in Hong Kong.
Crown regional account manager Bushra Siddiqui tells of a partner in an international law firm who, unable to find the schooling he wants for his three children, will now leave his family in Singapore and commute on weekends.
"We are seeing an increasing trend of families choosing to stay behind, so that only the employee moves, and that puts a lot of strain on the relationship and on the assignment," she told AFP.
It's also putting strain on companies that want their best people in Hong Kong.
"In the last year or so we've seen a slightly increasing trend of families just refusing to come, purely because they can't get schooling," Siddiqui said, adding that schooling was a greater concern than sky-high rents or pollution.
"That obviously means that companies go from their first pick for a position to their second or third, so they're not getting the talent they want."
Parents are forced to split their children between schools, move to undesirable catchments where waiting lists are shorter, or send their children to Cantonese-language schools where English is taught as a subject
Companies with enough spare cash pay up to HK$3 million for debentures for senior executives' children, the price of a ticket to the top of a waiting list at one of the city's elite international schools.
"They're very expensive and they're not available even in the secondary market... We've seen a trend of companies being less willing to buy these simply because it's a huge financial commitment," Siddiqui said.
AmCham wrote to the government last year to call for immediate action to address the crisis.
Almost 70 percent of AmCham's members say the problem is affecting their business, a survey found last year. Another poll by the Australian Chamber of Commerce produced a similar result.
"Increasing numbers (of companies) are relocating senior positions and their teams to markets like Singapore, Shanghai and Bangkok," AmCham's de Silva told Hong Kong lawmakers in a speech last month.
"Put simply, there is a critical shortage of English language primary school places on Hong Kong Island. This is a serious challenge to Hong Kong's competitiveness."
The government responded with a review of the situation that concluded there was enough room. It says 5,000 more places will be available by 2013.
But de Silva and other spokespeople for the foreign business community say the government's position does not account for the acute shortage of primary school places on Hong Kong island, where most expatriates live and work.
"Our biggest concern is that this continued denial and inaction is harmful for children, it's harmful for families and it's really harmful for the future of Hong Kong," she told AFP.