Decades of underinvestment in businesses has left the UK in a “growth doom loop” according to new analysis by progressive think tank the Institute for Public Policy Research (IPPR).
The UK economy would have had an extra £562 billion in public and private investment between 2006-2021 if it had stayed at the G7 average, according to the analysis.
The IPPR said business investment is lower in the UK than any other country in the G7 and the UK ranks 27th for business investment among the 30 OECD countries that it has data for, worse than every other developed economy apart from Poland, Luxembourg, and Greece.
It said the UK has been below average in the G7 for private sector investment since 2005.
“Had the UK maintained that position since then, the private sector would have invested an additional £354 billion in real terms in the UK,” said the IPPR.
“If public sector investment had been similarly at the level of the G7 median, the UK government would have invested an additional £208 billion between 2006 and 2021.”
George Dibb, associate director for economy at IPPR, said: “If the economy is the engine of a country, investment is its fuel. But the UK’s tank is running on empty and it’s harming economic growth, driving inequality, and slowing progress towards net zero and energy security.
“Currently, the UK is experiencing a debilitating case of investment-phobia, and the government’s aversion to investing to seize future opportunities is stopping us from getting out of the growth doom loop we find ourselves in.”
Luke Murphy, associate director for energy and climate at IPPR, said: “The UK is in an investment and growth doom loop. Chronic under-investment, public and private, is delivering stagnating growth and a struggling economy.
“The answer is an ambitious plan to invest in long-term, job-generating, green industries of the future, which is vastly different from borrowing to fund irresponsible tax cuts.
“There’s a global green race and right now the UK isn’t even on the starting line, if we want to reap the huge benefits that the green transition offers, we need to invest, and invest now.”