Treasury needs to shift focus to business investment

ADS had one central priority for the Chancellor’s Autumn Statement: Unlocking business investment.

Why? Business investment, which is key to our members’ long-term, global competitiveness, is now 24% below pre-recession levels.

Today the OBR forecast that business investment would fall by 5.5% in 2013.

As growth returns, it is critical that we unlock the pent up demand for investment which can spur growth across UK supply chains.

The headline from the OBR’s assessment was that the economy had picked up more strongly than expected. Despite this good news, the OBR was more cautious about the economy’s underlying growth potential. Most of the uplift had come from consumer-driven spending rather than business investment and net trade.

So while the announcement today provided much needed support for exports, skills and R&D funding, the missing puzzle piece was significant action to boost business investment.

Reading through the OBR outlook on the UK economy, it is the significant underperformance of business investment over the past 3 years that jumps out (and is probably why HM Treasury are advocating the dynamic impact of their cuts in corporation tax rates).

And that’s why unlocking business investment – and in particular unlocking the £500bn+ in cash on their balance sheets – is going to continue to be a priority for ADS in 2014.