A ‘vicious cycle’ is developing as UK economy lags behind G7 peers in investment.


Decades of disinvestment by government and business have plunged Britain’s economic growth into a “doom loop”, according to the centre-left think tank IPPR.

Richard Baker | in pictures | Getty Images

According to the UK’s Institute for Public Policy Research, decades of underinvestment by government and business have kept Britain’s economic growth in a “doom loop”.

New research from a centre-left think tank has found that the UK’s contribution of £500bn ($638bn) to business investment is less than that of other similarly wealthy countries.

A spending shortfall of half a trillion pounds puts the UK lowest among all G-7 countries, and 27th out of 30 OECD countries, with only Poland, Luxembourg and Greece investing more.

The IPPR says the UK’s underinvestment in infrastructure, research and development, skills and training has spanned decades and successive governments since 2005.

To remain at the G7 average since then, private sector investment would have had to have been $354 billion higher in real terms since then, while public sector investment would have had to have been $206 billion higher.

“The UK is investing and growing. Chronic investment, public and private, is delivering sustained growth and a struggling economy,” said Luke Murphy, Associate Director of Energy and Climate at the IPPR.

Separate research released by the IMD on Tuesday placed the UK behind other major economies in global competitiveness, particularly in terms of economic performance and business efficiency.

A UK government spokesman did not immediately respond to CNBC’s request for comment on the findings.

However, the right-wing Conservative Party – in power for 13 years – said increased business investment, including a package of tax breaks announced in the autumn budget and more spending on technology and green energies, would help boost the economy.

The latest forecast from the International Monetary Fund shows that the UK is set to be the worst performer of all G7 economies this year, with Britain’s gross domestic product expected to fall by 0.3% overall.

High living and borrowing costs continue to dampen consumer spending, while Brexit uncertainty weighs on business sentiment.

The IPPR said more public investment could boost business confidence and “crack” the private sector with additional spending, likening the behavior to the Biden administration’s deflationary legislation.

“If the economy is the engine of a country, then investment is the fuel. But the UK’s tank is running on empty, and it is harming economic growth, harming inequality, and slowing down progress towards net zero and energy security,” said George Dibb, associate director of economics at the IPPR.

The opposition Labor Party – currently 16 points ahead of the Tories in the polls – said last week it would back its key green industries spending pledge as interest rates continue to rise.


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