Return to National productivity measures

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







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