Any report that is introduced with, “As much as the impact of Brexit on growth is the focus of debate at the moment, the UK’s disastrous productivity growth and persistently low levels of investment pose a much bigger on-going threat to our economy” is eye catching.
The introductory text then goes on to make the following observations (amongst others):
- What the UK really needs to prosper is productivity induced growth, driven by innovation and the adoption of new, more efficient technologies
- This requires investment – not just investment in new machinery and new infrastructure, but also in new technology, new skills and new business practices. The problem is that currently the UK is failing to invest
- Businesses, the drivers of innovation, are the most in need of investment. Yet lending to businesses by banks as a proportion of their domestic lending has declined from 31 percent in 1988, to 8 percent in 2016
- SMEs have suffered particularly badly, with net lending to small businesses, declining year-on-year since the financial crisis and net lending to medium-sized businesses only starting to pick up again in 2014. In 2016/17, one fifth of SMEs were still unable to access suitable finance
- Lending to businesses now accounts for only five percent of UK banking assets, compared with 14 percent of Eurozone banking assets
I have printed off the report “Closing the Finance Gap: How a national investment bank could enterprise and raise productivity” by Justin Protts (CIViTAS) and will be reading it over the next couple of days.
For now, I am grateful for the timely link between productivity and investment that we will use to seaway the opening session’s presentations in tomorrow’s Finance in the South West event (21st February).