Stop Worrying About Business Investment, says IoD

13 February 2006

A little less moaning and a little more gloating called for

Business investment in the UK is in good health, bosses said today. The latest Economic Briefing from the Institute of Directors (IoD) argues there is little need to worry about the current state of investment.

UK business investment is high as a proportion of GDP, when compared with the 1980s and '90s. The current level of 10% of GDP compares favourably with 8-9% over the '87-'97 period. Faster depreciation of IT equipment and falling capital goods prices being the most obvious explanation, the IoD concluded.

Under capitalisation of software investment suggests that business investment is greater than shown in official statistics.

The IoD also argued that official statistics do not accurately reflect business investment in the Twenty First Century. Intangible investment (in R&D, innovation and human capital) is critical to business success but tends to fall outside the scope of traditional measures of business investment (in buildings, plant and equipment).

Graeme Leach, Chief Economist at the IoD said:

"Our business investment performance is good not bad. It would be nice if we could hear a little less moaning and a little more gloating. Of course there is always room for improvement, but if one considers the recent past, business investment as a share of GDP, has been above historic levels, at the same time that two major trends threatened to undermine it. The first being unfunded pension deficits and the second being widespread share buybacks and high dividend payments. All in all, well done UK plc!"