Also in the bottom group are Bulgaria, Croatia, Malta and Cyprus. At the top of the ranking are the the Netherlands, Germany, Denmark and Ireland, which have seen their competitive edge boosted.

The Commission says in the report presented in Brussels on Thursday that the EU's industrial sector has a number of advantages that should be better exploited.

At the same time, the Commission also warns member states that they must take action to boost investment, improve access to funding, increase the effectiveness of public administration, gain access to foreign markets, encourage innovation and address the issue of high energy prices.

The European Commission will consider the reports for each country in its recommendations on fiscal and structural reforms to member states.