Business investment in the UK the lowest of any G7 countries, analysis finds

The flow of new investment into the UK has been the lowest of any of the world’s most advanced economies for three years running, new analysis shows, as leading political parties sharpen their pledges to boost the economy.

Business investment by private companies was lower in the UK than any other G7 country in 2022, according to research by the Institute for Public Policy Research (IPPR).

The G7 is a group of seven major economies, also incorporating the US, Canada, France, Germany, Italy and Japan.

The analysis, which used the latest datasets provided by the Organisation for Economic Co-operation and Development (OECD), showed that the UK was at the bottom of the pack for the third year in a row.

It suggests that the country is not attracting as much business investment, as a percentage of gross domestic product (GDP), as its international peers.

Furthermore, total investment across the whole economy – including from the Government, corporations and households – has remained lacklustre, according to the IPPR.

Data showed that the UK has had the lowest level of investment in the G7 for 24 of the last 30 years.

Dr George Dibb, associate director for economic policy at IPPR, said: “If the economy is an engine, then investment is its fuel.

“The UK’s dire productivity performance is the single biggest driver of our dire living standards.

“Without resources flowing into new investment, it’s hard to see how UK economic performance can improve.”

Nevertheless, incomplete data for 2023 suggests that the UK has edged its way out of the bottom spot, with the level of private investment overtaking Canada during the year.

General Election campaign 2024
The Labour party says its ‘first mission’ for government is to kick-start economic growth (Stefan Rousseau/PA)

Furthermore, the UK is heading toward a General Election and leading political parties have beefed up promises to grow the economy in a bid to win over voters.

Labour says its “first mission” for government is to kick-start economic growth, with plans including a strategic partnership with businesses and reforming the planning system to build new homes.

The Conservatives, in their manifesto, say economic growth will come from measures such as cutting taxes, rather than increasing borrowing or reducing spending on public services.

The IPPR said the UK can encourage greater business investment by developing a “green industrial strategy” which “seeks to remove barriers to growth, creates business and regulatory certainty, and solves coordination problems across the economy”.

Dr Dibb said it is down to the Government to take the lead and “show businesses that the UK is the secure, sensible and stable place to invest”.