UK economy in growth ‘doom loop’ after decades of underinvestment

More than half a trillion pounds’ worth of underinvestment by government and business over recent decades has left Britain’s economy trapped in a growth “doom loop”, according to a thinktank. Sounding the alarm as the economy struggles to gain momentum, the Institute for Public Policy Research said the UK risked falling further behind comparable wealthy nations without a sharp turnaround in approach. Business investment is lower in the UK than in any other country in the G7 , and 27th out of 30 OECD countries, ahead of only Poland, Luxembourg and Greece.

Highlighting a severe shortfall in public and private investment stretching back over several decades, the IPPR’s research showed that Britain had ranked below the G7 average since 2005 for spending on infrastructure, research and development, skills and training. Had the UK maintained its position at the G7 average since that date, the private sector would have invested an extra £354bn in real terms. If public sector investment had also held that position, the UK government would have invested an additional £208bn between 2006 and 2021.

However, the UK has steadily slipped down the global investment league tables as successive governments have held back from boosting expenditure, alongside a faltering performance in the private sector – amounting to a shortfall versus the G7 average worth the equivalent of 30 Elizabeth line rail projects. The centre-left thinktank said low investment put Britain at risk of being left behind in a global race to develop the green industries of the future, which are forecast to be worth $10. 3tn (£8tn) to the global economy by 2050.

The findings come as Rishi Sunak’s government attempts to reboot economic growth with a focus on boosting business investment, including with a package of tax reliefs announced as part of the spring budget. Business leaders say political and economic instability, Brexit, high inflation and rising interest rates are deterring firms from investing in Britain. The IPPR said increased public investment could “crowd-in” private sector investment and give confidence to companies to choose the UK as a place to build the green companies of the future – provided the government invested with a sense of longevity and certainty, as Joe Biden’s administration had done in the US .

George Dibb, an 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. skip past newsletter promotion Sign up to First Edition Free daily newsletter Archie Bland and Nimo Omer take you through the top stories and what they mean, free every weekday morning Privacy Notice: Newsletters may contain info about charities, online ads, and content funded by outside parties.

For more information see our Privacy Policy . We use Google reCaptcha to protect our website and the Google Privacy Policy and Terms of Service apply. after newsletter promotion “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.

” The government was approached for comment. .