Inputs – Capital
- The UK currently invests a smaller percentage of its GDP than any of its main competitors except the USA yet investment is said to be ‘the lifeblood of economic growth’
- The more you invest, the more national productivity should rise, unit costs fall, competitiveness rise, sales rise and wealth, jobs and tax-take increase
- But the amount of investment a nation needs depends on where it’s starting from:
- If capital assets are worn out or in old smoke-stack industries, more will be needed than if they were relatively new, as in China
- The UK has most of the infrastructure it needs in place already – it just needs to be maintained – high speed rail links, more London airport capacity and two more motorways may be all the new investment needed
- And there are quite different categories of investment hidden within the above figures so it’s not clear where any nation should invest more, or less, for most impact
- The UK’s problem also lies in finding sources of this investment:
- The private sector’s profits will be squeezed if growth is not forthcoming soon
- The banks are re-building their balance sheets and investing in risk-free assets
- Business angels and venture capitalists have become even more cautious
- The UK government has to make drastic public expenditure cuts over the next few years – its pockets are not bottomless pits despite ‘quantitative easing’
- Foreigners’ inward investments, which once imported cash, latest technology and best practices, are drying up as ‘sovereign debt’ threats loom large
