Britain remains at the bottom of the G7 in investment as private spending slows

Britain remains at the bottom of the G7 in overall investment, despite Labor’s pledge to inject billions of pounds into public spending over the next two years, according to international data.

Figures from the Organization for Economic Cooperation and Development show that total investment, including both public and private spending, stood at only 18.6 percent of GDP in the third quarter of the year. That leaves the UK trailing all other G7 countries, including the United States, Germany, France and Japan.

The data underscores the lingering weakness in Britain’s economy. The UK has recorded the lowest level of investment in the G7 for 23 of the last 31 years, a factor widely blamed on poor productivity growth and weak long-term economic performance.

In comparison, Japan recorded the highest level of investment among the G7 at 27 percent, while Germany, despite a two-year recession, invested nearly 20 percent of GDP during the same period.

Labor has made stabilizing investment a key plank of its economic strategy, pledging to increase public spending on infrastructure, transport and housing. Economists at PwC estimate that public investment will rise by £13 billion by 2026-27, marking the biggest two-year increase since the 2008 financial crisis.

However, there is growing concern that this increase in government spending will not be matched by the private sector. PwC chief economist, Barret Kupelian, warned that private investment is expected to stagnate due to business uncertainty and slow profit growth.

“There will be a lot of focus on domestic development from the government, especially public investment which is developing at a high speed,” said Kupelian. “But private investment is unlikely to respond strongly in the near term.”

The level of challenge is outstanding. EY estimates that up to 1,000 major investment projects are set to start or be completed by 2040, with public spending to reach £1.1 trillion. However, this will also leave a big gap in getting money.

According to EY-Parthenon, meeting Labour’s wider ambitions, which include defense spending rising to 3 per cent of GDP by the end of the decade, would leave an investment shortfall of £583 billion. If defense spending rises to 5 per cent of GDP by 2035, the gap could widen to £817 billion, putting further pressure on public finances.

Mats Persson, global head of EY-Parthenon, said the UK is facing increasing pressure from excessive investment needs. “The government has made progress in unlocking infrastructure finance, but long-term financing needs across energy, defence, health and transport are growing rapidly,” he said.

Economists have long argued that low levels of investment in Britain are a drag on productivity. Business investment drives innovation and technology adoption, while public investment provides the housing and transportation networks needed to support growth.

Louise Haigh, former Labor Transport secretary, said the crisis reflected decades of short-term policies. “Underinvestment has plagued the UK economy for a century,” he said. “Our five-year political cycle doesn’t give businesses the long-term certainty they need to make money.”

The deputy leader of Reform UK, Richard Tice, accused the government of creating a tense situation for investors. He said the uncertainty and tax changes have made money to continue elsewhere and said his party will prioritize the reduction of regulations and the promotion of wealth creation.

With private investment faltering and public spending under pressure, economists warn that bridging Britain’s investment gap will require more than key funding commitments – and a sustained effort to restore confidence in the wider business community.