Britain has recorded the lowest investment level among G7 nations this year, presenting a significant challenge to Prime Minister Keir Starmer’s efforts to revive economic growth.
Data from the Office for National Statistics (ONS) indicates that public and private sector investment comprised only 18.6% of GDP in the three months leading up to September, trailing even Germany, which is currently navigating its most prolonged economic stagnation.
The underwhelming investment numbers pose a setback for Prime Minister Starmer and Chancellor Rachel Reeves, both of whom have prioritized reducing regulatory obstacles and streamlining planning processes in an attempt to attract greater investment.
Tera Allas, chair of the Productivity Institute’s advisory board, emphasized that persistently weak investment is a critical factor undermining the country’s economic expansion. She attributed this weakness in part to the U.K.’s intricate planning regulations and a climate of ongoing policy uncertainty, which have discouraged companies from initiating large-scale investments.
Data show that British investment has lagged behind the G7 average for more than two decades. Based on research from the Productivity Institute, even if the U.K. were to increase investments by four percentage points of GDP, it would take nearly a century to match current levels seen in economies such as the U.S., Germany, France, and the Netherlands.
Recent developments have exacerbated the problem, with several prominent companies scaling back or abandoning investment plans in the U.K. In September, Eli Lilly suspended the development of a £279 million laboratory at London Gateway, Merck cancelled its £1 billion research centre in the capital, and AstraZeneca put a £200 million project in Cambridge on hold.
Allas pointed to deep-rooted attitudes within both government and British business leadership that have led to underinvestment in essential infrastructure, suggesting that a mix of short-term priorities and reluctance to take risks have played key roles in this trend.
A government spokesperson noted that the U.K. is projected to be the G7’s second-fastest-growing economy in 2025 and highlights the recent commitment of £150 billion in investments secured during a U.S. state visit.
The spokesman also added that the forthcoming Budget aims to curb inflation, facilitate interest rate reductions, and minimize borrowing costs, while focusing on attracting high-quality investment to drive jobs and economic expansion.
