The report also called Prime Minister Tony Blair's decisions in the Middle East conflict into question.
The report believes the Government's actions have radicalised British Muslims and galvanised the terrorist movement, The Sunday Telegraph reports.
The Anglican report said: "The growing links between domestic and international issues means that British foreign policy to the Middle East impacts as much upon the UK's well-being as it does on the security and prosperity of the Middle East."
Debating the decision to follow US' lead into Iraq, the report claimed that Britain had been left separate from the rest of Europe as a consequence of its foreign policies in the Middle East.
The document called for Blair's successor to focus immediately on implementing a more efficient foreign policy.
The report read: "The next Prime Minister will hopefully, by virtue of being able to move beyond the recent history of the Iraq war, be better positioned to affect the necessary change in British foreign policy to respond more effectively to the region's challenges."
