The UK has the lowest rates of
investment of any G7 economy, according to new analysis by
IPPR.
The latest comparable data for the
year of 2022 shows business investment, by private companies, is
lower in the UK than any other G7 country, for the third year in
a row. The analysis also shows that the
UK ranks a lowly
28th for
business investment out of 31 OECD
countries.
Countries like Slovenia, Latvia and
Hungary all attract higher levels of private sector investment
than the UK as a per cent of GDP. Only Greece, Luxembourg, and
Poland see lower business investment than the UK. This includes
investment in things like factories, equipment and
innovation.
Looking beyond just private capital to
total investment (including public, private, household and
non-for-profit investments) the UK is still at the bottom of the
G7. In fact, the UK has
had the lowest level of investment in the G7 for 24 of the last
30 years.
The last time the UK was 'average' in
the G7 for total investment was in 1990. If the UK had maintained
an average position over the last three decades, there would have
been an additional £1.9
trillion worth of
investment into the country (in real
terms).
Despite the UK's position at the
bottom of the G7 investment league table, both the Conservative
and Labour parties plan to further reduce public investment over
the next parliamentary term.
Current Conservative policies imply
significant cuts to public investment after the election. Even
though Labour promises to invest £4.7 billion more per year than
the current government through its ‘Green Prosperity Plan', this
still implies an overall fall in
investment.
IPPR is calling on the next government
to lead from the front by designing and delivering high quality
public investments to crowd in private sector funds, especially
into industries of the future like electric vehicles and
renewable energy. Likewise public sector investments in
education, infrastructure and healthcare are needed to create the
right conditions for growth. As such, IPPR
recommends:
-
Committing to a long term
green industrial strategy, to create business and regulatory certainty
-
Redesigning fiscal rules, to remove rigidity and constraints on productive
government investment
-
Establishing public investment
benchmarks, to set out
explicitly how much is needed to achieve government's
goals
Dr George Dibb, associate
director for economic policy at IPPR,
said:
“If the economy is an engine, then
investment is its fuel. 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.”
ENDS
NOTES TO
EDITORS
- IPPR analysis is based on the latest full OECD investment
dataset for 2022
- Private investment: Gross fixed capital formation by
corporations for the UK and the G7
- Total investment: Gross fixed capital formation (total
economy) for the UK and G7
- Public investment as a per cent of GDP since 1950 with
projections of future investment
