Business investment: Another unwanted title for UK economy
The UK has the lowest level of business investment among the world’s richest economies, according to new research, underscoring the challenges facing the next government in getting British businesses investing.
Analysis by the Institute for Public Policy Research (IPPR) showed that of all G7 nations, the UK had the lowest level of private sector investment in 2022, the last year for which comparable data is available.
This is the third successive year in which the UK has ranked bottom among the world’s richest economies in terms of investment.
Out of 31 OECD countries, the UK ranked 28th, beating only Greece, Luxembourg and Poland.
Looking back over the longer term, total investment in the UK, which includes public sector as well as private sector investment, has been the lowest in the G7 for 24 of the last 30 years.
The last time the UK was in the middle of the pack for total investment was in 1990. If the UK had managed to maintain an average position over the past three decades, there would have been an additional £1.9 trillion worth of investment into the country.
“The UK’s dire productivity performance is the single biggest driver of our dire living standards,” George Dibb, associate director for economic policy at IPPR, said. “Without resources flowing into new investment, it’s hard to see how UK economic performance can improve.”
Rachel Reeves, the Shadow Chancellor, has promised that Labour would be the most “pro-business government” in British history in an attempt to spur investment.
Labour has promised to use “every available lever” to encourage business investment, including through government spending.
Through its ‘Green Prosperity Plan’, Labour has promised to invest £4.7bn more per year than the current government, although this is not enough to prevent public sector investment falling as a share of national income.
“Public investment crowds in private investment, the government need to take the lead by developing a green industrial strategy and show businesses that the UK is the secure, sensible and stable place to invest,” Dibb said.