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The UK’s 30-year investment shortfall

Plus, why Atom Bank is finding a four-day week “considerably less challenging” than hybrid working, Apple scraps buy now, pay later service and BYD's Euros triumph and struggles

A purse with pound notes in it

A damning new report from The Institute for Public Policy Research (IPPR) has found that the UK has the lowest rates of investment of any G7 economy for the third year in a row and the 24th time in the last 30 years. The country also sits 28th out of the 31 OECD countries, ahead of only Greece, Luxembourg and Poland.

The research comes amid a relentless election campaign in which both the Conservative and Labour parties have said they are planning to further reduce public investment over the next parliamentary term.

Investment by corporations as percentage of GDP

The think tank’s report found that the last time the UK was average in the G7 for total investment was in 1990. While there have been four technical recessions since then, if the country had maintained an average position over the past three decades, there would have been an additional £1.9tn of investment in the country in real terms.

One of the report’s authors and associate director for economic policy at IPPR, Dr George Dibb, says:

“If the economy is an engine, then investment is its fuel. The UK’s dire productivity performance is the single biggest driver of our dire living standards. Without resources flowing into new investment, it’s hard to see how UK economic performance can improve.”

It points to a recent survey of economists by the Financial Times which asked: Which single policy change after the next election would do most to boost the UK’s long-term growth? Some 52 of 85 polled recommended increasing investment.

Public spending creates a certainty that encourages more investment in the private sector. The IPPR is encouraging the next government to design and deliver high-quality public investments to “crowd in” private sector funds, as well as create the right conditions for growth by public sector investments in education, infrastructure and healthcare.

Other recommendations include:

  • Committing to a long-term green industrial strategy to create business and regulatory certainty
  • Reviewing fiscal rules to determine how to address the volatility of and constraints on productive government investment
  • Establishing public investment benchmarks to set out explicitly how much is needed to achieve the government’s goals

Business Question

As of October 2023, what is the estimated combined turnover of medium-sized companies in the UK? 

A: £450bn
B: £500bn
C: £800bn
D: £1.2trn

The answer can be found at the bottom of the page.

Business in Brief

Everything you need to know

1. A Labour government would allow private equity dealmakers to continue to benefit from a lower tax treatment on profits when their own cash is at risk, shadow chancellor Rachel Reeves has suggested. You can read more here.

2. The boss of UK digital bank Atom says implementing a four-day week has been “considerably less challenging” than navigating the rise of remote working. The bank introduced a four-day 34-hour working week in 2021 for all employees without cutting pay. You can read more here.

3. The percentage of train journeys made using season tickets has fallen to a record low, according to new figures. Office of Rail and Road data shows the tickets accounted for just 13 per cent of the 1.6 billion journeys taken to the end of March. This is down from 15 per cent during the previous 12 months and is the lowest percentage since records began in 1987. You can read more here.

4. Apple has scrapped Apple Pay Later, its buy now, pay later service that launched in the US only last year. It marks a retreat in the iPhone maker’s ambitions to become a major provider of financial services. Read more here.

5. The heavily hyped US-based electric vehicle maker Fisker has filed for bankruptcy protection. It was modelled on Tesla but has succumbed to rapid cash burn to deliver its Ocean SUVs in the US and Europe. The company is the second automotive failure by Henrik Fisker after his first venture went under in 2014. You can read more here.

Business Quotes

Inspiration from leaders

“It’s important to be willing to make mistakes. The worst thing that can happen is you become memorable.”
– Sara Blakely

Business Thinker

Ideas on the future of business and leadership

1. 🎡 London drags down UK productivity 🎡

2. 🏡 Hybrid work has changed meetings forever 🏢

3. 💼 The many reasons for our declining productivity 💼 

And finally…

Sponsors billboard background seen in Press Conference Room of Olympiastadion Berlin

A Chinese EV company is headlining Europe’s biggest football competition in the home of BMW and Mercedes Benz… oh the irony. BYD’s sponsorship of the Euros is a gamble that appears to be paying off. 

According to Auto Trader, the company saw a 69 per cent week-on-week increase in the number of views of models on its website during the first weekend of the tournament. 

However, BYD is facing some hefty backlash from regulators, as the EU threatens to impose tariffs on its products. The Guardian has done a great deep dive into the unfolding drama.

You can read the full article here.

The answer to today’s Business Question is C: £800bn.

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