New index reveals Reeves’ Budget has downgraded the value of a British passport

The fall is the biggest of any of the G7 countries with the UK overtaken by a string of European counterparts including Bulgaria, Greece, Romania, Czech Republic, Italy and Hungary

The UK’s attractiveness as a destination for entrepreneurs and investment has been badly hit by Rachel Reeves’ Budget, according to a respected international index.

The latest annual Nomad Capitalist Passport Index has suggested that tax hikes have added obstacles to employ people and the abolition of non-dom status in the UK has harmed the country’s reputation abroad.

The index has revealed that the UK dropped 14 places from its position in 2024 of 21st to 35th.

The fall is the biggest of any of the G7 countries with the UK overtaken by a string of European counterparts including Bulgaria, Greece, Romania, Czech Republic, Italy and Hungary.

Rachel Reeves has been criticised for her Budgets (Luke Jones/PA)

The only EU countries below the UK are the Netherlands and Austria, fuelling concerns that Brexit is also continuing to damage Britain’s competitiveness.

The findings are a blow to the election promise of Ms Reeves and Sir Keir Starmer that economic growth would be the number one mission of the Labour government.

Instead a record £40bn tax rise in the first Budget in 2024 was followed by a £26bn one last month as Labour tried to find money for increased NHS and welfare spending, with the benefits bill set to go above £400bn.

Khatia Gelbakhiani, chief growth officer at Nomad Capitalist blamed tax hikes on employment, property and the wealthy for the fall in the UK’s competitiveness.

He said: “Britain’s collapse down the index is not an accident. It is the direct consequence of policy choices made by the Labour government.

“The abolition of the non-dom regime, the shift to a residence-based system that, for many, means worldwide taxation on an arising basis, and a Budget built around ever-higher taxes have fundamentally changed how the UK is viewed by globally mobile entrepreneurs and internationally active families.

“Freezing income-tax thresholds, raising taxes on dividends and property income, capping National Insurance relief on salary sacrifice pension contributions and introducing a mansion tax on homes over £2 million sends a clear signal that success is something to be penalised rather than welcomed.”

He added: “The result is plain in the data. The UK has suffered the largest fall in the G7 because globally mobile people respond to incentives, certainty and long-term stability. When governments keep changing the rules and raising the cost of staying, people do not argue. They go to where they’re treated best.”

The government has said that is now targeting the cost of living with Sir Keir and Ms Reeves highlighting the decision to abolish the cap on child benefit which cost the UK taxpayer a further £3.5bn a year.

It has also targeted cost of living issues like freezing rail fares next year and providing added childcare support.

Attempts to reduce welfare spending by £5bn were abandoned after a rebellion by Labour MPs before the summer.

Shadow chancellor Sir Mel Stride said: "By punishing success and driving up taxes, Labour is sending the wrong message to the world: that ambition is unwelcome in the UK.

"Rachel Reeves' choices are making it harder for investment, innovation, and ambition to thrive, but it doesn't have to be this way.

"A future Conservative government would bring taxes down, attract investment and wealth creators to the UK and end Labour's war on aspiration."

The Independent has asked the Treasury for comment.