LONDON (SHARECAST) - The UK has risen to eighth place in an annual study of global competitiveness.
The World Economic Forum's (WEF) survey said the improvement from 10th position was due to a more efficient labour market compared with "rigid" European economies.
The UK overtook Denmark and Japan, with the WEF praising the UK's "sophisticated and innovative businesses" and saying the country's meritocratic workplaces were attracting talent from abroad.
However, the body said the UK's macroeconomic environment was hindering competitiveness.
The report ranked it 110th, down from 85th last year, due to the scale of the fiscal deficit, the increase in public debt and relatively low national savings rate.
Switzerland, Singapore and then Finland took the top three places in the survey of 144 economies.
The US economy fell from fifth to seventh place, despite the WEF saying it remained the top innovator.
China was rated as the most competitive major emerging economy.
The UK Treasury welcomed the report, saying government reforms had driven the improvement.
The report uses 12 'pillars of competitiveness' to assess a country's ranking.
These are: institutions, infrastructure, macroeconomic environment, health and primary education, higher education and training, goods market efficiency, labour market efficiency, financial market development, technological readiness, market size, business sophistication and innovation.
The global top 10
(previous year's ranking in brackets)