Britain's top 500 companies lag the world in capital investment

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The Independent Online

British industry is lagging behind its international competitors in terms of capital investment and the gap is widening, according to an authoritative study published this morning.

The world's 500 biggest companies increased their capital expenditure last year by 17 per cent to £627bn. But the UK's top 500 companies only raised their spending by 12 per cent to £86bn, according to the Department of Trade and Industry's 2001 Capex Scoreboard.

Launching the report, the Science and Innovation Minister Lord Sainsbury drew attention to the UK's inferior performance and said there was a clear link between overall investment and company profitability. "If our companies are to compete effectively in future, it is essential that they continue to strive to close this gap," he added.

The scoreboard also shows that "capex intensity" – capital expenditure as a percentage of total sales – fell among UK companies last year. In 2000 it averaged 8.5 per cent but this year's figure has fallen to 7.9 per cent. That compares with a capex intensity of 9.6 per cent for the international top 500.

The one good piece of news is that Britain's biggest companies – the top 44 – are matching and in some cases beating their overseas competitors in Europe, the US and Japan when it comes to capital expenditure.

The UK's performance on capital expenditure matches or exceeds that of its international rivals in oil and gas, retail, pharmaceuticals, and food processing. But it compares badly in sectors such as engineering, electronics and IT hardware. Mike Tubbs, a senior industrialist seconded to the DTI's future and innovation unit, said that in sectors where the UK's performance was better, it was stretching its lead but where it was worse the gap was becoming more acute.

The scoreboard also shows that overall the UK invests much less in manufacturing than its competitors. Of the largest 500 UK spenders, only 23 per cent are in manufacturing. In Japan the figure is more than 50 per cent and in France, Germany and the US it is 30 per cent.

The world's biggest capital spender is the German-American car company DaimlerChrysler with total investment last year of just under £19bn. Britain's biggest spender was BP which is 11th in the league table with investment of £5.8bn. The UK's second-biggest spender, BT, came in at 19 with investment of £4.8bn. The total stock of capital expenditure stands at £6,600bn for the top 500 international companies and at £901bn for the UK's top 500.