Business investment shows a decline

26 November 2009

Official figures have revealed that business investment fell in the third quarter of the year.

According to the Office for National Statistics (ONS), the level of money invested by businesses dropped back by 3 per cent compared with the second quarter of the year.

In real terms, that represents a fall of £885 million.

Compared with overall business investment for 2008, this year has so far seen a decline of 21.7 per cent.

The manufacturing sector cut back on investment by 9.5 per cent in the third quarter; but the services sector registered a 27.1 per cent increase.

Commenting on the numbers, David Kern, the chief economist at the British Chambers of Commerce (BCC), said: “The further decline in business investment highlights the challenges and risks facing the economy over the next few years. Despite this fall being smaller than in previous quarters, the persistent downward trend is worrying."

Mr Kern went on to say that although firms, faced with low demand and weak bank lending, have been forced to cut investment in order to survive, it is nonetheless vital to reverse the falls so business can respond to increased demand when the recovery gathers momentum.

He added: “The government must remove all obstacles hampering businesses from maintaining and recruiting skilled labour, and from accessing the required finance to rebuild capacity.”