Last week I blogged about the continuing contraction in UK business investment. Against expectations that capital expenditure would have taken off by now and be contributing positively to growth, investment levels are still around a third below their pre-recession peak. In the blog, we questioned whether conditions were now right for recovery.
This week, Standard and Poor published its Global Capital Expenditure Survey, and it points to weak outlook for investment globally in the next few years. Despite significant cash holding by large corporates the survey does not a signal a return to the double digit growth rates in capex seen pre-financial crisis. Following some modest growth in 2012, the S&P survey points to a contraction this year of around 1% followed by an even bigger drop of 5% in 2014.
Some of this decline is a consequence of falling investment in energy and mining-related investment, which has accounted for a massive two-thirds of capex growth through much of the noughties.
But some interesting regional differences are also identified
- Investment in Western Europe is set to disappoint as companies invest elsewhere for better growth opportunities
- US investment should be on the up, increasing its share of global investment in the coming years
- Emerging markets look a bit more fragile, especially South America
So it's not just the UK that could struggle to see much of a contribution from investment to growth - at least in the short term.
Our key message remains that policy makers must be focused on actions to increase the number of companies choosing to invest and export in the UK. The launch of the Automotive Strategy today is positive in that respect. Its forward look at how we develop the technologies that will anchor large companies and boost supply chains could support investment in thsis sector in the decades to come.
It also, however, identifies some of the cross-cutting issues that we still need to get right - improving the skills base and increasing the flow of finance - if the UK is to make genuine progress on better balanced growth.