By T. Jayani, JadeTimes News
Investment levels in the UK are trailing significantly behind those of other leading economies, raising concerns about future economic growth, according to a report by the Institute for Public Policy Research (IPPR). The think tank highlights that the UK’s total investment, encompassing both business and government spending, is notably lower than that of its G7 counterparts.
The IPPR emphasizes that both major political parties, the Conservatives and Labour, are planning to reduce government investment in the next parliamentary term. To counteract this, the think tank advocates for the next government to commit to a consistent industrial strategy, which would enhance investment from private companies by eliminating frequent policy changes.
The issue of improving productivity in the UK is a major topic as the general election approaches. Dr. George Dibb, the IPPR's associate director for economic policy, likens investment to fuel for the economic engine, essential for boosting productivity and economic output. This, in turn, can improve wages and living standards. Investment by businesses in areas such as new factories, equipment, and technologies, as well as government investment in infrastructure like schools, healthcare, and transportation, is crucial.
OECD data reveals that the UK has had the lowest investment levels in the G7 for 24 of the past 30 years. Currently, UK investment stands at 18.3% of national income, significantly behind the US, which is at 21.2%. The IPPR attributes the UK's poor productivity since the 2008 financial crisis to this low investment level.
Paddy Fletcher, co founder of the Port of Leith whisky distillery in Edinburgh, shares his experience of struggling to secure funding, highlighting a gap in support for businesses seeking substantial investments from institutional investors.
The IPPR proposes several measures to boost investment, including
Developing a comprehensive industrial strategy to provide business certainty and coordination.
Avoiding frequent policy changes.
Revising fiscal rules to enable more government investment.
Factors such as Brexit, political uncertainty, and strict planning regulations have also been cited by business groups as contributing to the low investment levels. Dr. Dibb calls for increased public sector investment in infrastructure to stimulate private investment, noting an over reliance on the services sector, which typically invests less.
Political party positions on boosting investment vary
Labour’s shadow chancellor, Rachel Reeves, plans a £7.3bn National Wealth Fund for investment in steel, ports, and electric cars.
The Conservatives focus on tax breaks for businesses and reallocating HS2 funds to local infrastructure.
The Liberal Democrats propose a new industrial strategy to enhance business confidence.
Reform suggests abolishing business rates and scrapping net zero pledges to boost oil and gas investment.
The SNP aims to outline its plans in an upcoming manifesto, emphasizing prosperity within the European Union.
Both Labour and the Conservatives have promised planning reforms to unlock investment. Emma Pinchbeck of Energy UK highlights the need for changes in planning laws to facilitate building onshore wind farms, while Zack Simons, a planning barrister, points out that greenbelt laws hinder necessary growth in certain areas.
