UK business investment falls at fastest rate since financial crisis
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Version 0 of 1. Investment spending by UK businesses fell at the fastest rate in almost six years at the end of 2014 as energy companies responded to falling global oil prices. Business investment dropped by 1.4% in the fourth quarter, according to the Office for National Statistics. The decrease was mainly driven by oil and gas companies reining in North Sea spending. Related: The UK's economy cannot run on coffee for ever It was the biggest quarterly fall since the financial crisis in the second quarter of 2009. The ONS published the number as part of its second estimate of GDP between October and December, which details how the UK economy performed. Growth was confirmed at 0.5%, a slight slowdown compared with the 0.7% achieved in the third quarter of 2014. Growth in 2014 overall was unchanged at 2.6%, the fastest rate of annual expansion since 2007 and the strongest among the G7 economies . The Treasury said: “It is clear that the foundations for a sustainable recovery are being laid.” Despite the fall in business investment in the fourth quarter, investment rose by 6.8% in 2014 overall, the strongest annual rise since 2007. In a further pre-election boost for the government, net trade made a positive contribution to growth in the fourth quarter, after export growth of 3.5% outpaced a smaller 1.3% rise in imports. “The second estimate of Q4 GDP confirms that the recovery slowed at the tail end of 2014, but has become better balanced,” said Samuel Tombs, senior UK economist at Capital Economics. “The one wrinkle in the figures is the 1.4% quarterly fall in business investment – the second in a row. But this seems to reflect the cancellation of investment plans in the oil sector, rather than a wider malaise. “All in all, the latest GDP figures need not ring any alarm bells regarding the strength or sustainability of the UK economy’s recovery.” However, the UK recovery is still heavily reliant on consumers. While business investment fell in the fourth quarter, household spending increased by 0.5%. Meanwhile, of all the key output measures – services, production and construction – the services sector is the only one to have surpassed pre-crisis levels. Between October and December, service sector output increased by 0.8%, unchanged from the ONS’s first estimate. Production was revised up to 0.1% growth from an earlier estimate of a 0.1% decline, helped by an upward revision of manufacturing output growth to 0.2% from 0.1%. Construction output, however, was revised down to a 2.1% fall in the fourth quarter, bigger than the 1.8% drop estimated previously. The government has argued that in order to secure a sustainable future, the UK economy must rebalance away from its heavy reliance on debt-fuelled consumer spending and towards more manufacturing and exports. However, little progress has been made and the British Chambers of Commerce believes the chancellor’s target set in 2012 to double UK exports to £1tn by 2020 looks out of reach. |