UK languishing near bottom of OECD rankings for investment in vital infrastructure
New TUC analysis shows the UK ranking towards the bottom of OECD countries across a number of categories of investment vital for economic development. The analysis has been issued to support our submission to the Treasury on the Autumn Statement which is published today (see Kate Bell’s blog here).
Most strikingly of all, at 0.6% of 2014 GDP, UK investment in transport equipment ranked lowest in all OECD countries; the OECD average was 2.1 per cent.
The results are unsurprising at one level, because the low ranking for the UK in terms of total investment is familiar. So for 2014, total capital investment in the UK was 16.6% of GDP; the average across all OECD countries was 20.8%. On this basis the UK is in third to last place, ranking 33rd out of 35 countries, with only Greece and Portugal investing less.
But this asset-based analysis separating out different categories allows us to zone in on the areas of particular weakness. The figures are drawn from the main OECD annual national accounts database – see methodological note at the end of this post. Not all countries have data for all different categories of investment, so some ranking are based on fewer countries.
Along with ranking lowest in transport investment, the UK also ranks second to last (20th out of 21 countries for which data is available) in the critical area of information and communications technology (ICT) equipment; and 23rd out of 27 countries for investment in other machinery and equipment.
The UK performs a little less badly in dwellings investment and other buildings and structures. But even in these sectors, the UK is still well below the OECD average. The only area where the UK is ahead of the OECD average is in intellectual property, ranking 13th of 34 countries. The table below summarises the position, followed by charts for each asset.
There are vast shortfalls with norms across other advanced economies countries, making plainly obvious areas where new public expenditure should be focussed. There is now a widespread agreement that the government need to spend more. In their February 2016 interim Economic Outlook, the OECD argued: “Investment spending has a high-multiplier, while quality infrastructure projects would help to support future growth, making up for the shortfall in investment following the cuts imposed across advanced countries in recent years.”
TUC General Secretary Frances O’Grady has challenged the government to step up to the mark:
“We can’t just waltz into Brexit with our fingers crossed. If the government doesn’t invest in Britain it could go very badly wrong. And working people will pay the price with fewer jobs, lower wages and higher prices.
“But if the government invests in Britain, we can build an economy strong enough to thrive.
“We need investment in rail and roads. We need investment in new homes and clean energy. And we need investment in skills, education and fair pay for a world-class workforce.
“It’s the right thing to do for better jobs and higher wages. And it’s the best way to build an economy strong enough to compete in the global marketplace.
“So let’s see it happen in the Autumn Statement – come on Chancellor, step up to the mark with a Great British Investment Plan.”
** Note on method: The analysis is based on OECD figures for capital investment as a share of GDP, available on their Annual National Accounts database (http://stats.oecd.org/). Investment by asset and GDP are taken from Table 1: Gross domestic product. ‘Investment’ corresponds to ‘gross fixed capital formation’ (System of National Accounts code ‘P5’). The ratios are derived from cash estimates in national currencies for 2014, which is the most recent year that has figures available for all countries, though a number of countries do not produce figures for some asset classes.