1. Introduction

Business investment is the acquisition of non-financial assets less the proceeds from disposal of these assets by private and public corporations. These include investments in:

  • transport

  • information and communication technology (ICT) equipment and other machinery and equipment

  • cultivated assets (such as livestock and vineyards)

  • intellectual property products (IPP, which includes investment in software, research and development, artistic originals and mineral exploration)

  • other buildings and structures

While gross fixed capital formation is published by these broad asset types, with the addition of dwellings and costs of ownership transfer on non-produced assets, business investment is not broken down to its component assets.

As part of the quarterly estimates of business investment in the UK, contributions to growth of business investment by these assets are calculated and published only for the latest quarter but as of 29 March 2019, this release will include seasonally adjusted time series of business investment by asset in current prices and chained volume measures.

To accompany the first release of these data, this article will analyse the components of business investment and discuss past and current trends in the data.

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3. The recent slowdown in business investment

Business investment fell in each of the four quarters of 2018. This was the first time business investment fell for more than three consecutive quarters since the economic downturn in 2008 to 2009. In their February 2019 Inflation Report, the Bank of England said that “although weaker global growth may have reduced the demand for investment, it is unlikely to explain the marked weakness over the past year”, pointing to a “UK-specific factor depressing investment”, which the Bank’s Agents’ summary of business conditions attributed to “a growing proportion of contacts putting new capital investment on hold until there is greater clarity around Brexit.”

Figure 6 shows contributions to business investment growth by asset since Quarter 2 (Apr to June) 2017. While there is no single asset driving the slowdown in business investment over the past two years, ICT equipment and other machinery and equipment made negative contributions to business investment growth in three of the four quarters of 2018. Transport equipment is the other main contributor to the overall slowdown, with recent fall in this asset due largely to a decrease in aircraft investment.

However, in 2018, growth in this asset was broadly flat and so its contributions to growth were much smaller, between positive 0.1 and negative 0.1 percentage points.

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4. Future releases of these data

This article serves as a summary of trends of components within business investment as well as providing clarity and context for the new breakdown of business investment. This is part of the improvements that the Office for National Statistics (ONS) is making to its outputs on the subject of gross fixed capital formation (GFCF) and business investment, by providing more detailed breakdowns of data.

Business investment broken down by asset will be published quarterly alongside the Business investment in the UK statistical bulletin and as such, analysis of business investment and its components will be included in that publication.

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Contact details for this Article

David Roberts
Telephone: +44(0)1633 455250

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