Low business investment was listed in a recent study as a key factor in the UK’s weak record for productivity, alongside a lack of management and commercial patents.
The joint report, issued by researchers from the think tank Resolution Foundation and the London School of Economics, found that low business investment was the most clearly defined difference between the UK and nations with higher productivity.
In 2019, business capital investment here in the UK was recorded at about 10 per cent of gross domestic product, while in Germany, the US and France, it averaged at around 13 per cent. Additionally, business investment in the UK for research and development (R&D) also trailed behind the levels exhibited by other countries.
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The report commented that in the short term, raising business investment in the UK to German, French or US levels would either constrict household consumption or need Britain to attract the eye of more foreign investors.
It added that a rise in business investment solely funded by domestic resources would generate about an additional eight percentage points in gross domestic product over a span of 20 years, but household consumption could take up to 15 years to recover.