Business investment in UK ‘rock bottom’ of G7 nations for third year in a row

The Institute for Public Policy Research said the UK’s “dire productivity performance” was “the single biggest driver of our dire living standards”. The thinktank said higher levels of investment would help boost wages and incomes.

The UK had the lowest rates of business investment out of all G7 nations for a third year in a row, a new report has claimed.

The economies of the US, Canada, France, Germany, Italy and Japan are all said to have attracted higher levels of funding from the private sector – as a percentage of gross domestic product (GDP) – in 2022.

The Institute for Public Policy Research (IPPR), which carried out the research, said the ranking was important because investment in things like new factories, equipment and innovations helped boost economic activity, wages and household incomes.

Dr George Dibb, associate director for economic policy at the left-leaning thinktank, 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.”

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The IPPR’s report – based on an analysis of data from the Organisation for Economic Co-operation and Development (OECD) – also found the UK came 28th out of 31 members of the international group for private sector investment.

Countries including Slovenia, Latvia and Hungary all attracted higher levels than the UK.

Only Greece, Luxembourg, and Poland had lower rates, the thinktank said.

However, incomplete data suggests that the UK’s economy may have overtaken Canada in the G7 rankings in 2023.

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The IPPR said that the last time the UK had an “average” level of investment among G7 nations was in 1990. Since then the UK has been below average. The thinktank said if average levels had been maintained the country would have benefited from an additional £1.9trn.

The IPPR said the “rock bottom” performance urgently needed addressing and called on whoever wins the general election to introduce measures to increase investment.

It pointed to the Conservatives and Labour, and said both parties appeared to be planning to reduce public investment over the next parliament if elected to government.

Dr Dibb said: “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.”

Labour has said its “first mission” for government is to kick-start economic growth, including via a strategic partnership with businesses and reforming the planning system to build new homes.

The Conservative Party has pledged to boost economic growth via measures such as tax cuts, rather than by increasing borrowing or reducing spending on public services.