New Zealand, Singapore and the United States are the best countries in which to do business, according to the World Bank's latest benchmarks of business environments around the world.
Britain slipped from seventh place to ninth place in the league table, overtaken by Canada and Denmark.
Much of this fall was due to increased regulation and levels of taxation. British firms pay more than twice as much in taxes than those in the USA, the report found, amounting to almost 53 per cent of their gross profits, a situation exacerbated by the complexity of the British tax system.
The report, Doing Business in 2006 examines five sets of business environment indicators: starting a business, hiring and firing workers, enforcing contracts, getting credit, and closing a business; it expands the research to 145 countries and adds two new indicators, registering property and protecting investors.
And while Britain slipped backwards, Eastern European countries made dramatic progress, with Serbia and Montenegro improving in 8 of the 10 criteria used in the rankings.
But while New Zealand and the USA may be good places to run a business, they are not such comfortable environments to be an employee> Neither has any legal requirement for employers to pay severance pay to workers who have been laid off, the only two countries in the developed world not to do so.
Nordic countries all ranked in the top 15 despite high levels of taxation and generous welfare systems. But African countries filled the foot of the table, with Sudan, Chad, the Central African Republic, Burkina Faso and Congo in the bottom five places.
There was more bad news for the UK, meanwhile, after official figures showed that productivity was falling compared to its main G7 economic rivals widened last year.
Productivity was nine per cent lower than the average for the G7 last year. Output per worker in the USA was 24 per cent higher than in the UK, while productivity in France was 11 per cent higher.