The UK has been ranked 18th in the world for competitiveness, amid fresh warnings that austerity policies may be holding the economy back and putting social cohesion at risk.
Britain's position in the annual World Competitiveness Rankings was unchanged since last year and up from a low-point of 22nd in 2010, but was well below the ninth position recorded when the global league table was first compiled in its present form in 1997.
Experts from the IMD business school in Switzerland, which ranks 60 major economies annually, said that European countries like Britain were "heavily constrained by austerity programmes that are delaying recovery and calling into question the timeliness of the measures".
The programme's director, Professor Stephane Garelli, warned that harsh austerity measures designed to cut state deficits in a number of European states risked antagonising their populations to the extent that they threaten the social stability needed for a return to prosperity.
Britain has lost its "dominant position and competitive clout" since 1997, and is among a group of 11 EU states which have slumped by more than five places in the table since that date, while emerging economic giants like China, South Korea and Mexico have forged ahead, found the report.
The USA regained the top slot after ceding it last year to Hong Kong, which fell to third. Switzerland was Europe's most competitive nation, moving up from third to second place. In fourth place was Sweden, followed by Singapore, Norway, Canada, the United Arab Emirates, Germany and Qatar.
Big risers included Ireland - overtaking the UK to move from 20th to 17th - China (up from 21st to 23rd) and Japan (up from 27th to 24th). Some of the steepest falls were recorded by ailing EU members Italy (down from 40th to 44th), Spain (down from 39th to 45th), Portugal (down from 41st to 46th) and Hungary (down from 45th to 50th).
The biggest rises in competitiveness since 1997 were seen in Sweden (up 15 places to 4th), Switzerland (up 10 places to 2nd) and Poland (up 10 places to 33rd), while the most precipitous declines were recorded in Argentina (down 31 places to 59th), Spain (down 19 places to 45th) and Greece (down 18 places to 54th).
Britain was ranked highly for international investment (6th), scientific infrastructure (9th), institutional framework (12th) and business legislation (13th), but low for public finances (48th), international trade (40th), employment (31st) and attitudes and values (31st).
Professor Garelli, director of the IMD World Competitiveness Centre, said: "Generalisations are, however, misleading. True, Europe's competitiveness is declining, but Switzerland, Sweden, Germany and Norway are shining successes. Latin America is disappointing, but there are great global companies all over that region. Brazil, Russia, India, China and South Africa are immensely different in their competitiveness strategies and performance, but the BRICS remain lands of opportunities."