Inputs – Capital

The UK currently invests a smaller percentage of its GDP than any of its main competitors except the USA yet capital investment is said to be ‘the lifeblood of economic growth’

The more you invest, the more national productivity tends to rise, unit costs fall, competitiveness rises, 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 much of the infrastructure it needs in place already – however, high speed rail links, more regional airport capacity and more motorways across the Pennines, from the south coast to the Midlands and from Chichester to the Chunnel are desperately needed still

The UK’s problem lies in finding sources of this investment:

• Private sector profits are currently being squeezed

• Banks are still 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

Overall, the UK’s prospects for growth from increased capex do not appear to be healthy