Business investment is stagnating. Coalition policies look set to exacerbate the problem and will do little to help the economy meet OBR's ambitious estimates.
New data out today for January, February, and March suggests that business investment is stagnating at around £27 to £30 billion – nearly a quarter below their peak level. Coalition policies look set to exacerbate the problem.
As the graph shows, business investment has failed to rebound to anywhere near the peak levels of 2007 and instead is stuck below £30 billion. It is still down 7.7 per cent on this time last year and down 22.4 per cent on its peak level – although it went up slightly on its trough last month.
Total manufacturing investment, meanwhile, continues to fall and is down a further 0.2 per cent on the last quarter of 2009 at £2.4 billion. It is now down 37.6 per cent on its peak. Most of the rise in business investment is due to growth in service sector investment.
It will certainly be interesting to see the Q3 data later in the year when we will get some indication of how the Coalition’s policies start to affect the numbers. The Government has recently cut industrial support including the loan to Sheffield Forgemasters; announced the end of Regional Development Agencies; and cut investment allowances which was described by the Institute for Fiscal Studies as likely to favour “supermarkets over manufacturers“.
It is hard to square those policies with the Office of Budget Responsibility’s prediction (Table C2, p.84) that business investment will jump from 1.4 per cent in 2010 to 8.1 per cent in 2011, 10.0 per cent in 2012, and 10.3 per cent in 2013. In total, the OBR is predicting a 56.2 per cent rise in business investment by 2015.
23 Responses to “Business investment continues to stagnate”
Ananda Smith
Business investment continues to stagnate | Left Foot Forward: Business investment is stagnating. Coalition polici… http://bit.ly/cCrab2
Daniel Brawn
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Anon E Mouse
mike – Those chief execs are in private companies, not funded by the taxpayer – what business is it of yours what the do or do not pay themselves?
You seem to be advocating state control of private companies with that type of remark…
Remember mike: We’re all in this together…
Felicity
Mark, you’re right about the OBR forecasts – I would genuinely challenge their belief that this rebalancing can happen with depressed investment though. I’m not sure where it’s supposed to come from!
And yes, Forgemasters was clearly politically motivated, though as it happens it could be a strategically important firm if the UK wants to position itself as an economy at the forefront of nuclear energy development.