Is UK Business Investment Unusually Weak?

Abstract

In the 15 years to 2000 UK business investment rose quite substantially in real terms. Having shown little deviation from an average of 7¼ per cent over the period 1965–85, the real share of business investment in GDP measured 10¾ per cent in 2000 (see figure 1). One of the factors contributing to this increase was the sharp fall in the relative price of investment goods, the scale of which is illustrated by the altogether different trends in real and nominal shares of business investment in GDP.