New government has chance to reverse 25-year trend that has seen nearly £2 trillion of investment lost from UK economy, says report

A group of major transport companies and infrastructure investors calls for Budget to be circuit-breaker that reverses trend through decisive action on business rates
A new report from Oxford Economics finds that, on average over the past 25 years only crisis-hit Greece has worse investment record than UK among 38 major economies
The study identified nearly £2 trillion of lost investment
Bridging investment shortfall would give households an extra £1,540 a year in disposable income by 2040

A report published today reveals that the UK has lagged behind almost all major economies in investment for 25 years, missing out on nearly £2 trillion of spending on growth-boosting projects.

The drain on productivity has been so strong that unless the UK closes the investment gap to the G7, households would miss out on £1,540 a year in real disposable income by 2040 - according to the Oxford Economics study, The UK’s Investment Shortfall.

A group of major transport businesses, leaders and infrastructure investors have written jointly to the Chancellor John Healey calling on him to “write a new chapter for the UK economy” by reforming sky-high business rates and creating the conditions needed for long-term private investment.

The group, including the CEOs of Eurostar, Channel Tunnel owner Getlink, the Global Infrastructure Investor Association, London Gatwick, London St Pancras Highspeed and Manchester Airports Group, have been forced to consider action as a result of rates bills that have up to trebled.

The report reveals that in every year since 2000, the UK has sat at - or near - the bottom of the G7 for the amount invested by both the public and private sectors. In 2025, the UK invested 18.9% of GDP compared to an average of 22.5% among the 38 OECD countries. Averaged over the past 25 years, only Greece ranks lower.

Oxford Economics reports that high public debt and the Government’s fiscal rules limiting further borrowing, business will need to shoulder most of the burden for closing the UK’s investment shortfall.

There is strong appetite across these businesses to invest. However, the gap between UK business investment and the rest of the G7 average is three times bigger today than it was 25 years ago.

The report identified three barriers that set the UK apart from higher-investing economies: the burden and design of business taxation; the costs of delivering new capacity, particularly planning, energy and construction labour; and policy unpredictability. When businesses do find a way to invest, they pay an “unpredictability premium,” researchers found, incurring the cost of adapting to new policies brought in by different governments.

They found that if the UK had matched the average of the other G7 economies throughout the 25-year period, an extra £1.9 trillion would have been spent on transport, housing, IT and modern equipment - £109 billion in the last year alone.

Weak investment has been blamed for the UK’s low productivity, which in turn hits living standards. The report found families would have £1,540 more real household disposable income per year by 2040 if the UK could recover its business investment shortfall with other G7 countries.

Innes McFee, CEO of Oxford Economics, said:

“The UK has been stuck in a low-growth rut since the late-2000s financial crisis, and it has become the country's defining economic problem.

“A large part of the explanation lies with investment. For many years the UK has put less into new machinery, buildings, infrastructure and technology than its counterparts in comparable economies, so the capital available to each worker has grown more slowly and output per hour with it.

“This report was commissioned by some of the biggest infrastructure operators and investors in the country. They encounter the barriers to investment described here in their day-to-day decisions, and wanted them set out clearly, measured against the economy as a whole, and put before those in a position to act on them.

“The obstacles are, for the most part, of the UK's own making, and that is a reason for optimism. Conditions can be improved, and the reward is a larger, more productive economy and higher living standards that endure.”

The report finds that UK public sector investment is set to run around 2.6% of GDP over this Parliament, its highest level in more than 40 years, helping to narrow the gap with the G7 average. However, it concludes that public investment alone cannot close the UK's investment gap, with barriers to private sector investment limiting its overall impact.

It says: “A public pipeline, however ambitious, will deliver less than intended if the environment facing private capital remains discouraging.”

Read the full report here.

Ken O'Toole, CEO of MAG, said:

"The growth of our airports has helped raise living standards across the country. Our previous investments have created thousands of jobs and opportunities, often for those who find themselves not in education or training.

"The connectivity these investments have enabled has helped businesses in the North, South and Midlands access international markets and attracted global firms to our regions, generating high-value jobs in fast-growing industries.

"We have the capacity and ambition to do more. We are ready to help reverse the UK's long-standing under-performance on investment and help ensure growth is felt in every postcode. But our ambition must be matched by a Government that understands the conditions business needs to invest. The Budget is an opportunity to demonstrate that."

Pierre-Hugues Schmit, Chief Executive of London Gatwick, said:

“London Gatwick is ready to deliver the infrastructure this country needs to grow. Our Northern Runway Programme will add £1 billion to the economy every year, create 14,000 jobs and bring significant tourism and trade benefits. As a business that must invest in and maintain our assets over the long term, our key ask for Government is to use the Budget to deliver a more stable and proportionate approach on key issues such as business rates and bring the policy certainty that we need to invest and stay competitive.”

Jon Phillips, Chief Executive of the Global Infrastructure Investor Association, said:

“Private capital is mobile by its very nature, only landing where the right signals demonstrate continuity, credibility, and consistency. Unless the Government gets these conditions right for business rates, the country will miss out on crucial investment in core infrastructure needed to grow the economy and improve connectivity.

"At a time when German, French, and Canadian governments are actively courting international investors, the UK is in danger of losing further ground to its competitors. The UK used to be seen as one of the most attractive investment markets in the world – it’s now time for policy change that ensures it regains that position.”

Yann Leriche, CEO of Getlink, said:

“The Oxford Economics report shows that the Government has a unique opportunity to act to increase the UK’s attractiveness for long-term private investment.

It identifies taxes on productive assets as one of the key barriers holding back investment, growth and competitiveness.

“The latest valuation cycle has seen Eurotunnel's rateable value nearly triple, despite no change in the scale or nature of the infrastructure, nor its revenues. Such major and unpredictable increases in business rates are detrimental to investment and growth.

“A fairer and more predictable business rates regime would unlock investment, boost UK competitiveness and expand productive capacity.”

Gwendoline Cazenave, CEO of Eurostar, said:

“This report reflects the increasingly challenging environment for businesses seeking to invest and grow in the UK. Eurostar is proud of its long-term commitment to the UK, having invested significantly in our double decker trains, and infrastructure over the past 30 years, and with significant plans for the coming decade. Our new £1.7 billion fleet is a vote of confidence in international rail. A business rates system that supports ongoing investment is essential to the UK’s long-term economic growth.”

Robert Sinclair, CEO of London St. Pancras Highspeed, said:

"Creating an environment that allows businesses to invest is crucial for driving growth in the UK economy. There is significant potential for international rail to be at the forefront of driving that growth and connecting the UK with Europe, now is the time for the government to seize this opportunity".