Britain `lagging in investment'
Thursday 12 December 1996
The Government's claim that British industry compares well with other industrial economies, made in its competitiveness White Paper in June, is strongly challenged in a joint report from the Machine Tool Technologies Association and Oxford Economic Forecasting. They present figures showing that the share of investment in GDP is lower in the UK than elsewhere, and that spending on research and development is lower too.
The report also shows that the accumulation of a dismal investment performance over the years means the amount of capital per worker in the UK - the plant and equipment each person has to work with - is less than half the German level, lower than in Taiwan and not much better than in Korea.
It concludes that the British problem is therefore not just a matter of a low investment share keeping trend growth low, the usual diagnosis. It is also that investment has not been high enough to raise the level of capital per worker to the international norm. "Our living standards continue to lag behind," it says. The White Paper's comparison of the share of business investment in GDP in the UK and other countries is criticised as misleading. These figures show Britain on a par with Germany and France and ahead of the US.
However, the new report points out that contracting out by the UK government has boosted that particular figure. In addition the exchange rates used to make the comparison flatter the UK at the expense of the other countries.
Comparing a broader measure of investment shares, such as total public and private investment in machinery and equipment, shows the UK lagging behind all its main competitors.
Malcolm Taylor, president of the MTTA, presented its conclusions to William Waldegrave, chief secretary to the Treasury, yesterday. Mr Taylor said: "Investment, especially investment in technology, is vital to our future prosperity."
After the discussion, Mr Waldegrave said: "In setting the right climate of low inflation and steady growth, the Government's economic policies are encouraging business to expand and invest with confidence."
Mr Taylor said the association had been concerned for some time about the UK's poor performance compared with other nations, and especially about the absence of any action to encourage innovation.
Investment as % of GDP 1980-95
US Japan Germany France Italy UK
Gross fixed capital
formation 18.1 29.5 20.4 20.4 20.5 17.0
Gross fixed capital
residential construction 14.0 23.9 14.5 14.8 14.7 13.5
Gross fixed capital
& equipment 8.0 11.4 8.5 8.7 11.4 7.8
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