by Nick Edser, Charlotte Edwards, Business reporter
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The UK’s investment levels remain among the worst among the world’s richest countries, and unless they improve it is difficult to see how the economy will grow, a think tank said.
The Institute for Public Policy Research (IPPR) said total investment in the UK lags “significantly” behind its nearest G7 competitor.
However, the center-left think tank said that the Conservative and Labor parties plan to reduce government investment during the next parliamentary period.
It calls on the next government to commit to an industrial strategy, end chopping and changing policies in order to boost investment by private companies.
After years of slow growth, the question of how to improve productivity in the UK economy has become one of the key battlegrounds in the run-up to the general election.
“If the economy is an engine, investment is its fuel,” said Dr. George Deeb, Associate Director for Economic Policy at the Institute.
Corporate spending on things like new plants, equipment, and technologies can help boost productivity and economic output, which in turn can help raise wages and living standards.
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Governments also invest when they spend money on things like new schools, health services, and new roads and railways.
However, IPPR said data from the Organization for Economic Coordination and Development (OECD) shows that when measuring total investment – covering both business and government – the UK has the lowest level of investment in the G7 of 24 countries in the world. The past thirty years.
Not only does the UK currently sit at the bottom of the G7 investment table, with investment at 18.3% of national income, but it is “significantly” behind the second worst performer – the US at 21.2%, she added.
“The UK’s poor productivity performance since the great financial crisis of 2008 is, by far, the biggest driver of our deteriorating living standards,” the institute said.
Dr Dib added: “Without resources flowing into new investment, it is difficult to see how the UK’s economic performance can improve.”
‘It took 10 years to find the money’
Paddy Fletcher is the co-founder of Port of Leith, an emerging whiskey distillery in Edinburgh city centre.
He told the BBC’s Today program that it took “10 years to find the money” to continue building the project.
He said existing government tax breaks were great for persuading individuals to invest relatively small amounts in companies, but said there was a “terrible gap” when it came to attracting larger institutional investors, and the government needed to intervene.
“When you’re looking for one, two or three million pounds to further develop your business and grow it to the next stage, you need to get institutional funding,” he said.
Commitment to an industrial strategy
The IPPR sets out several measures to try to raise investment across the economy. These include:
- Commitment to a comprehensive industrial strategy to remove barriers to growth, improve business certainty and increase coordination across the economy.
- End the “copy and change” policy. IPPR says that since 2010 there have been 11 industrial growth strategies or plans
- – Reviewing fiscal rules to unleash government investments
Business groups have pointed out that Brexit, political uncertainty and strict planning regulations have all contributed to low levels of investment in the UK.
Dr. Deeb said more public sector investment in infrastructure is needed to stimulate private sector investment.
Previous analysis by the Institute for Fiscal Studies He points out that current government spending plans will include a significant reduction in public investment over the rest of the decade.
Dr Depp also said there was an “over-reliance” on the services sector of the UK economy, which includes everything from hospitality to hairdressing, and it tends to invest at a lower rate.
What do the parties think?
- the job Shadow Chancellor Rachel Reeves hosted a meeting of the UK Infrastructure Council on Monday, with some of the biggest UK and international investors. Labour’s plans also include creating a £7.3bn National Wealth Fund to invest in steel, ports and electric cars.
- Conservatives They point to the fact that they have already given tax breaks to companies that invest and funnel £36bn of the modified HS2 high-speed rail link into local roads, rail and buses. They also want to reduce outdated EU regulations that they say slow infrastructure development.
- Liberal Democrats It has promised a new industrial strategy to give companies more predictability and confidence.
- Reformation It said it would scrap business rates on non-domestic properties altogether, which are paid through a levy on large online retailers. She also proposed scrapping net zero pledges to encourage more investment in UK oil and gas.
- Scottish National PartyHis party is due to publish its manifesto on Wednesday, but a spokesman said it would provide a “path back to prosperity in the EU”.
The two main parties, Labor and the Conservatives, have promised planning reform to try to boost the economy and open up investment.
Emma Pinchbeck, CEO of the UK energy company, pointed to the problem of not being able to build onshore wind farms.
“[This is] “Our cheapest form of generation, we need it to keep the lights on,” she said, adding that bureaucracy in planning slows the construction of offshore wind turbines.
Greenbelt planning laws designed to stop “urban sprawl” — the rapid expansion of cities and towns — have made it difficult to build in places where “it makes sense to focus our growth,” said Zach Simons, a planning lawyer at Landmark Chambers.