A new report has revealed that the United Kingdom has once again had the lowest rate of business investment among all G7 nations for the third consecutive year. The economies of the US, Canada, France, Germany, Italy, and Japan have all attracted higher levels of private sector funding, as a percentage of gross domestic product (GDP), in 2022. The report, conducted by the Institute for Public Policy Research (IPPR), highlighted the importance of investment in areas such as new factories, equipment, and innovations in driving economic activity, wages, and household incomes.
Dr George Dibb, associate director for economic policy at the left-leaning thinktank, stated, “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.”
According to the report, the UK ranks 28th out of 31 members of the Organisation for Economic Co-operation and Development (OECD) for private sector investment. Countries such as Slovenia, Latvia, and Hungary have all attracted higher levels of investment than the UK, with only Greece, Luxembourg, and Poland reporting lower rates.
However, incomplete data suggests that the UK’s economy may have overtaken Canada in the G7 rankings in 2023. In light of this, the IPPR called for urgent action to address the “rock bottom” performance and urged the winning party of the upcoming general election to introduce measures to increase investment.
The report also highlighted the UK’s consistent below-average investment levels since 1990. The IPPR estimates that if average levels had been maintained, the country would have benefited from an additional £1.9 trillion.
The thinktank emphasized the need for the government to take the lead in increasing investment, stating that “public investment crowds in private investment.” It called on both the Conservative and Labour parties to address this issue in their plans for the next parliament, as both parties appear to be planning to reduce public investment if elected to government.
Labour has stated that its “first mission” for government is to kick-start economic growth through a strategic partnership with businesses and reform of the planning system to build new homes. On the other hand, the Conservative Party has pledged to boost economic growth through measures such as tax cuts, rather than increasing borrowing or reducing spending on public services.