Investment levels in the UK remain among the worst of the world’s richest nations and unless they improve it is hard to see how the economy will grow, a think tank has said.
The Institute for Public Policy Research (IPPR) said total investment in the UK is “significantly” behind the nearest competitor in the G7 group of wealthy nations.
However, the centre-left think tank said both the Conservatives and Labour plan to reduce government investment over the next parliamentary term.
It is calling for the next government to commit to an industrial strategy and end the chopping and changing of policy in order to boost investment by private companies.
After years of sluggish growth, the question of how to improve productivity in the UK economy is one of the key battlegrounds in the run-up to the general election.
“If the economy is an engine, then investment is its fuel,” said Dr George Dibb, associate director for economic policy at the IPPR.
Spending by businesses on things like new factories, equipment and new technologies can help to boost productivity and economic output, which in turn can help to lift wages and living standards.
Governments also invest when they spend money on things such as new schools, the health service, and on new roads and railways.
However, the IPPR said that data from the Organisation for Economic Co-ordination and Development (OECD) shows that when measuring total investment – which covers both businesses and government – the UK has had the lowest level of investment in the G7 for 24 of the past 30 years.
It added that the UK currently was not just bottom of the G7 investment table with investment at 18.3% of national income, but “significantly” behind the next worst performer – the US at 21.2%.
“The UK’s dire productivity performance since the great financial crisis of 2008 is, to a large extent, the single biggest driver of our dire living standards,” the IPPR said.
“Without resources flowing into new investment, it’s hard to see how UK economic performance can improve,” Dr Dibb added.