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UK’s BUSINESS INVESTMENT STALLS

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Since the 2016 EU referendum, the business investment in the UK has continued to experience stagnation. This is in accordance with the recent official figures that were published on August, 24th this year.

In this year’s second quarter, the level of business investment was at 43.8bn Euros. This same situation is basically similar to what happened about 3 months prior to the 2016 Brexit referendum. As a result, there have been variations in the capital spending by most businesses, i.e. the UK economy has witnessed a steady increase in the capital spending from the year 2009 to the end of 2015.

Most businesses are experiencing delays in making or implementing their business decisions. This is evident from the figures that were shared in relation to the unpredictability of the economic situation in the post-Brexit referendum era. According to the Bank of England’s governor, Mark Carney, Companies are finding it difficult to make decisions on whether or not to enter new markets. This has been contributed to the unpredictable nature of the Brexit and by extension the need to project and evaluate what the situation would be like, in terms of the market’s supply and demand forces. Also, the UK and the EU have held back their business investments in Britain due to the uncertainty of their future relations.

It is expected by BoE that in 2020, investment in UK’s economy will be 20% point lower than they had expected before EU referendum. According to surveys carried out by BoE agents, businesses’ investment intentions have been increasing this year. As a result of last year’s referendum, it’s evident that many businesses are reluctant to pump more resources or money in expanding their business in Britain.

According to EY ITEM Club’s chief economic adviser, Howard Archer, rebounding in business investment in most cases depends on how the Brexit negotiations are progressed. He also added that as the year progresses, transition agreements may seem to be increasing in supportive to investment.

The Office of National statistics published the business investment figures together with its second estimations of UK’s economic growth in this year’s second quarter.

In three months quarterly, it is estimated that the economy expanded at the rate of 0.3 per cent towards the end of June, this was confirmed by ONS. This figure is the same as that published in July.

Investment in housing and government spending drove growth in GDP. However, household consumption rose by 0.1%. This is the slowest rate since the first quarter of 2014.

Also, there was a 2.2% decline in spending on transport. This can be attributed to the decline in the amount spent on the households. Later, ONS confirmed that this particular decline had a link to the change in car taxes.

According to the data published by the society of motor manufacturers and traders Thursday, car production was 17.7% higher in July this year than it was in the previous year. This was also pointed out by Kallum Pickering, a senior UK economist.

According to the latest GDP figures, it’s clear that the overall economic growth experienced so far has been as a result of the growth in Britain’s dominance in the service sector, experienced in the second quarter. This also includes the contributions from both the construction and manufacturing sectors (motor vehicles).

According to reports from the head of ONS GDP analysis, there has been slowed growth in the first half of this year. This has been attributed to this year’s second quarter weak performance in the manufacturing and construction. He also added that there was weak growth in household spending while more business investment showed no relative growth.