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23 August 2022

Sluggish investment is worsening the UK’s crises

The country has lagged behind its peers, and now we’re seeing the results.

By Nick Ferris

The UK is facing a storm of crises, from soaring energy bills to sewage flooding into our bathing water, the railways paralysed by strikes, and the NHS at breaking point. And with Rishi Sunak and Liz Truss still battling it out for the keys for No 10, it seems there is nobody steering the ship.

The government would be in a far better position to address problems if the UK’s economy were in good shape, but instead inflation is now forecast to hit 18 per cent in early 2023 and the Bank of England has said that the UK will enter a recession at the end of this year. 

Analysis of investment data from the Organisation for Economic Co-operation and Development, the intergovernmental group, shows how deep the UK’s malaise is. Quarterly overall economic investment in the UK was just 4.3 per cent greater in the first quarter of 2022 than it was five years previously, in the first quarter of 2017. This figure is far behind the growth recorded by countries such as France, Germany, Italy and the US.

 

The metric that the OECD uses, "gross fixed capital formation", includes investment from the business sector, governments and households. It shows that sustainable, long-term growth – investment – has been weak since the 2016 Brexit vote, which will make it harder for the economy to emerge from the doldrums. 

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[See also: How inflation is worse for women]

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