Britain’s sharp rise up the league table for global competitiveness to its highest place in a decade risks being reversed by the vote for Brexit, according to the World Economic Forum.
The body that runs the annual Davos event said Britain had risen three places in the past year to rank seventh, but said the analysis for its Global Competitiveness report had used data collected before the 23 June referendum.
Noting that the UK was currently one of the most competitive economies in the world, the WEF said: “Although the process and the conditions of Brexit are still unknown, it is likely to have a negative impact on the United Kingdom’s competitiveness through goods and financial markets as well as market size and, potentially, innovation”.
The WEF study chimes with reports from other global institutions - including the International Monetary Fund and the Organisation for Economic Cooperation and Development - which said ahead of the referendum that Brexit would have a long-term impact on the UK in terms of weaker inward investment and less trade.
The studies have been challenged by Brexit supporters, who say the UK will be able to forge closer trade links with countries outside the EU and will benefit from a reduction in the red tape generated in Brussels.
The WEF’s report is published at a time when the government is mulling over its exit strategy from the EU. Some ministers favour a soft Brexit under which the UK would prioritise access to the single market, while others back a hard Brexit that would make immigration control the priority in negotiations.
The chancellor, Philip Hammond, said: “Today’s report demonstrates our ability to sharpen our edge and improve our competitiveness. This government will build on that progress, as we demonstrate to the world that Britain continues to be highly competitive and open for business.”
Speaking at the World Trade Organisation in Geneva on Tuesday, the international trade secretary, Liam Fox, said the UK would push for more trade liberalisation after Brexit.
“The decision of the British people to leave the EU is not symptomatic of looking inwards, but a people who want to take more control over our laws, our money and our borders,” Fox said. “We are a proud and outward-looking trading nation.”
The WEF said the UK’s competitiveness relied on highly efficient goods and labour markets, in which it ranked 9th and 5th respectively out of the 138 countries assessed. The UK was third for technological readiness and scored more highly than the EU as a whole in11 of the 12 categories covered.
Britain scored less well than the EU for its macro-economic environment, largely because of its large budget deficit, high debt ratio and weak performance in savings. Despite a rise of 23 places in the category, the UK still ranks only 85th in the world.
The three top countries in the league table – Switzerland, Singapore and the US – remain unchanged from 2015, with the rest of the top 10 made up of the Netherlands, Germany, Sweden, the UK, Japan, Hong Kong and Finland.
European countries made up half of the top 10, but the WEF said there was a marked divide between the north and south of the continent. Spain was up one place to 32nd, Italy dropped a spot to 44th and Greece dropped five places to 86th. France, the second biggest country in eurozone rose one position to 21st.
“For all economies in Europe, maintaining and improving prosperity levels will depend heavily on their ability to harness innovation and the talents of their workforces”, the WEF said.
The report also noted an increase in both the developed and developing world in non-tariff barriers to trade, more burdensome customs procedures and tighter rules affecting both foreign direct investment and foreign ownership. The trend was most evident in high and upper middle-income countries.
Klaus Schwab, the WEF’s founder and executive chairman, said: “Declining openness in the global economy is harming competitiveness and making it harder for leaders to drive sustainable, inclusive growth.”
