Decades of under-investment leaves UK in “growth doom loop”

The total figure of underinvestment is enough to pay for 30 Elizabeth Lines, claims the think tank.

The research argues that if the UK had maintained the same levels of private sector investment since 2005, its economy would have seen an extra £354 billion in real terms.

George Dibb, associate director for economy at IPPR, said: “If the economy is the engine of a country, investment is its fuel. But the UK’s tank is running on empty and it’s harming economic growth, driving inequality, and slowing progress towards net zero and energy security.”

The report, which is published today, argues that chronic underinvestment in the UK is contributing towards low growth, and is leaving the UK behind other countries in the race to develop green industry.

Luke Murphy, associate director for energy and climate at IPPR, said: “There’s a global green race and right now the UK isn’t even on the starting line. If we want to reap the huge benefits that the green transition offers, we need to invest, and invest now.”

“The UK is in an investment and growth doom loop. Chronic under-investment, public and private, is delivering stagnating growth and a struggling economy.

“The answer is an ambitious plan to invest in long-term, job-generating, green industries of the future, which is vastly different from borrowing to fund irresponsible tax cuts.”

Previously, the IPPR has argued for the government to significantly increase public spending in order to tackle regional inequality and address climate change. It argues that even an additional £30 billion of public investment each year would leave the UK at a level of investment that’s below 4.5% of GDP - a level that some argue is essential for effective public investment.

The Northern Powerhouse Partnership is a group that looks to address regional inequality in the UK by boosting investment to the North of England. Its chief executive, Henry Murison, told The Yorkshire Post: “The UK has historically low investment, in particular in infrastructure, and this has led to the North of England having such unreliable rail services, with not enough frequency of services direct to the major stations or seats across the Pennines.”

“Even in the last few months, spending on vital projects like HS2 has been cut as a result of deferring expenditure to meet the current government’s poorly designed fiscal rules. In contrast, the Shadow Chancellor has rightly prioritised the need to balance the books on revenue spending but approach capital spending differently. It makes no sense to delay spending, increasing the eventual cost, and as the IPPR argue – losing the important benefit of improving productivity levels so as to permanently improve the debt to GDP ratio position. The short term pre-elections tax cuts being demanded of the Chancellor by his backbench colleagues just won’t deliver the same economic dividend long term.”

“Currently, the UK is experiencing a debilitating case of investment-phobia,” adds Dibb. “The government’s aversion to investing to seize future opportunities is stopping us from getting out of the growth doom loop we find ourselves in.”