UK business investment ‘lowest in G7’

Business investment in the UK is lower than in any other G7 country, for the third year in a row.

This includes investment in things like factories, equipment and innovation.

Unless investment levels improve it is hard to see how the economy will grow, the Institute for Public Policy Research (IPPR) said.

Based on levels of private sector investment as a percentage of GDP in 2022, the latest comparable data, the report shows that the UK is below fellow G7 members the United States, Canada, France, Germany, Italy and Japan.

Government investment is also “low, volatile and short-termist”, the left-leaning think tank said.

Including public, private, household and non-for-profit investments, the UK is still at the bottom of the G7. And this is familiar territory: the UK has had the lowest level of investment in the G7 for 24 of the last 30 years.

Among the 31 OECD countries, the UK ranks 28th for business investment. Only Greece, Luxembourg and Poland see lower business investment than the UK.

Despite the UK’s already low levels of investment, both the Conservative and Labour parties appear to be planning to reduce public investment over the next parliament if elected to government.

Although Labour has pledged to invest £4.7bn more per year than the current government through its ‘Green Prosperity Plan’, this still implies an overall fall in investment, the IPPR said.

The think tank called on the next government to introduce measures that will increase investment.

“If the economy is an engine, then investment is its fuel,” said Dr George Dibb, associate director for economic policy at the IPPR. “The UK’s dire productivity performance is the single biggest driver of our dire living standards. Without resources flowing into new investment, it’s hard to see how UK economic performance can improve.

“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.”