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Business: Investment

Question for Treasury

UIN HL1527, tabled on 29 June 2021

To ask Her Majesty's Government what assessment they have made of the levels of business investment for (1) the remainder of 2021, and (2) 2022.

Answered on

12 July 2021

As well as addressing the immediate challenges of COVID-19, the Government recognises the importance of acting now to create the conditions for an investment-led recovery driven by private sector growth.

Stimulating private sector investment will create jobs, drive innovation, and revitalise local areas and regions across the UK. This is central to the Government’s plan to secure a strong recovery and the Budget announced a package of measures to achieve this, including the new super-deduction to support business investment.

The Office for National Statistics, as part of the Quarterly National Accounts, published revised outturn figures for business investment in Q1 2021. In real and seasonally-adjusted terms, business investment fell by 10.7 per cent (£5.4 billion) in Q1 2021 compared to the previous quarter, or by 16.9 per cent (£9.2 billion) compared to Q1 2020.

At Spring Budget 2021, the Office for Budget Responsibility (OBR), which produces forecasts on the economy and public finances, revised upwardly the medium-term business investment outlook, expecting a return to its pre-crisis level in Q2 2022.

In the March 2021 Economic and Fiscal Outlook, the OBR highlighted the potential impact of the super deduction:

“As a temporary measure, it provides companies with a very strong incentive to bring forward investment from future periods to take advantage of the temporarily much more generous allowances. We assume that at its peak in 2022-23, this will raise the level of business investment by around 10 per cent (equivalent to around £20 billion a year) as spending is brought forward.”

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