Britain was given a small, but potentially valuable, endorsement from the World Economic Forum Wednesday after it pushed the recession-battered economy up two places to eighth in its annual Global Competitiveness Report.
Switzerland again topped the comprehensive ranking of 144 national economies based on what the group calls "twelve pillars" of competitiveness, including labour market flexibility, innovation, health and education, macroeconomic conditions and business sophistication. Singapore, Finland, Sweden and the Netherlands round out the top five with Burundi and Sierra Leone, two of the world's poorest countries, ranking last.
Britain's rank in the Global Competitiveness Index (GCI), which was developed in 2004, improved two places from last year's assessment, despite the over-arching gloom of the deepest recession in at least 50 years.
"The country improves its performance in several areas, benefitting from clear strengths such as the efficiency of its labor market (5th), in sharp contrast to the rigidity of those of many other European countries," said Xavier Sala-i-Martin, a professor of economics at Columbia University and one of the reports authors. "On the other hand, the country's macroeconomic environment represents the greatest drag on its competitiveness, with a fiscal deficit nearing 9 percent in 2011, an increase of 5 percentage points in public debt amounting to 82.5 percent of GDP in 2011 and a comparatively low national savings rate."
Britain's base ranking in the study was much lower - at 24, behind France, Belgium and Austria - but its overall place in the GCI is boosted by what the study calls "efficiency enhancers" such as flexible labour markets, technological readiness and higher education training.
The report also highlighted the growing chasm between economic prospects in Northern Europe - where six of the ten most competitive economies are based - and the European periphery and the effective epicentre of the region's sovereign debt crisis.
"Although the origins of these crises are diverse, one shared feature at the heart of the current situation in all these economies is their persistent lack of competitiveness and, therefore, their inability to maintain high levels of prosperity." the report's authors said. "Overall, low levels of productivity and competitiveness do not warrant the salaries that workers in Southern Europe enjoy and have led to unsustainable imbalances, followed by high and rising unemployment."
The WEF report's assessment of the two regions also offers some form of endorsement to Britain's embattled Chancellor, George Osborne, and his austerity-led economic strategy which has, to date, failed to deliver any form of growth or sustained reduction in public debt levels.
"In order to escape this downward spiral and return Southern Europe to a positive growth trajectory, a holistic set of competitiveness-enhancing measures that can bring confidence and strengthen the economic fundamentals of these economies will be required," the report says. It says the balance can only be restored by resolving the region' banking crisis, deepening labour market flexibility and "ensuring fiscal discipline and engaging in structural reforms that can reduce public spending in the medium to longer term."