The UK has moved up in the ratings to seventh place in the World Economic Forum’s (WEF’s) latest global competitiveness report, but the research body warns of ‘a clear downside risk to the UK economy from leaving the EU, with only limited potential for upside, at least in the short term’
The WEF’s global competitiveness index rates 138 countries worldwide, and the UK’s current ranking is its highest since comparable records began ten years ago. The UK has overtaken Japan, Hong Kong and Finland to make seventh place, with the WEF singling out its digital pioneering and support for entrepreneurs.
The WEF says the UK’s competitiveness rating is higher than that of the EU taken as an average of all 28 countries in areas such as innovation, business sophistication, labour market efficiency, technological readiness, financial market development, innovation, institutions, education and infrastructure. The UK scores below the EU average on the macroeconomic environment.
The forum has attempted to model the impact of Brexit on the UK’s competitiveness, but says the complexity of the relationship makes it hard to know what this will be.
However the WEF says of the 112 individual indicators that make up the global competitiveness index, 14 could be directly negatively impacted by Brexit, while three (potentially six) of the indicators have the potential to make a direct positive impact on the UK’s score and thus its ranking.
The WEF says that analysis of other non-EU nations that have a close trading relationship with the bloc is that in many of the indicators that are directly influenced by Brexit, the UK currently fares better than its non-EU peers.
For example, Switzerland ranks at 90th for prevalence of non-tariff barriers, while the UK is 28th. On trade tariffs, the rankings are UK fifth, Switzerland 41st, Norway 44th; while the rankings for the business impact of rules on foreign direct investment are: UK fifth; Switzerland 24th; Norway 29th.
However, the WEF points out that areas where countries like Switzerland and Norway excel are not directly influenced by EU membership. Norway’s macroeconomic environment is ranked number one in the world largely on account of its oil wealth; Switzerland’s number one status in innovation is based on its strong tradition of collaboration between business and academia.
The WEF states: ‘Therefore it is unlikely that the UK would immediately emulate these countries without major policy activity.
‘Our analysis, therefore, is that there is a clear downside risk to the UK economy from leaving the EU, with only limited potential for upside, at least in the short term.’
WEF’s research places Switzerland at the head of the global competitiveness table for the eighth consecutive year. It comes in the top 10 in 11 out of 12 pillars of competitiveness, and leads in four: innovation, business sophistication, labour market efficiency and technological readiness.
Singapore comes in second, for the sixth year in a row, winning points for strong infrastructure, higher education and training, and goods market efficiency propels the Asian nation to its high ranking.
The US is in third, a position it has occupied since the 2014-2015 report. Innovation, market size and financial market development are among the areas of strength. Germany has slipped down one position to fifth and is replaced by the Netherlands at number four, with Sweden placed sixth.