Britain has risen one place in the international economic competitiveness ratings, according to the World Economic Forum.
In its annual assessment of countries' competitiveness, the Geneva-based institution put the UK ninth - up from tenth last year.
"Overall, the country improves its performance thanks to gains derived from lower levels of fiscal deficit and public debt," it said.
The report was welcomed by Chancellor George Osborne who said it was further evidence that the Government's economic plan was seen internationally to be delivering a more competitive economy.
"The direct link the WEF draw been our credible fiscal policy and our country's ability to attract business and create jobs is compelling," he said.
The WEF said that the UK continued to benefit from an efficient labour market and a high level of financial development, despite the recent "difficulties" in the banking system and the continued problems with access to credit for business.
However, it said that Britain still needed to look at ways to raise the overall quality of its education system, particularly in the areas of mathematics and science which are crucial to fostering innovation.
Overall the ratings were topped by Switzerland for the sixth year in succession, followed by Singapore in second place and the United States in third.