UK business investment has grown at less than half the pace of the US since before the pandemic, underlining a widening gap in one of the main drivers of productivity and economic growth.
Official figures published alongside Thursday’s GDP data show UK business investment was 11% higher in the first quarter of this year than in Q4 2019. Over the same period, US non-residential private domestic investment rose by 28%, helped by strong capital spending linked to AI.
The short-term picture is also weaker in the UK. In the year to the end of Q1, UK business investment fell by 1.8%, while US investment rose by 5.8%. US growth was supported by a 10% rise in intellectual property investment and a 24% increase in information-processing equipment.
UK data can be volatile and revised, but the longer-term contrast is striking. By 2026, UK business investment was only 11% above its Q1 2016 level, compared with 52% growth in the US.
New BDO research adds to the concern. In a survey of UK mid-sized businesses, 60% of executives said they planned to pause or reduce investment while waiting for the situation in the Middle East to stabilise.
The OECD has linked weak UK investment to low productivity and slow growth in GDP per capita. It has urged the UK to improve skills, labour mobility and tax simplicity.
The Government’s 10-year industrial strategy aims to boost investment, but political uncertainty threatens to undermine its long-term objectives.
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