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UK endures most prolonged investment cuts since the Great Recession

Alanna Petroff
Senior Economics Correspondent at Yahoo Finance UK
Businesses have slashed their investments in the UK throughout 2018. Photo: Oli Scarff/Getty Images

It’s official. UK-based businesses cut their investments in every single quarter of 2018 – the first time since the Great Recession that the country has experienced such a prolonged decline in investment.

Businesses were reducing investments as the Brexit deadline approached. The divorce was originally set for today – 29 March – but was recently extended to either April or May. The Brexit date now depends on whether a separation deal is approved by the UK parliament.

The Office for National Statistics (ONS) said business investment fell to £46.7bn in the fourth quarter, down by 0.9% from the third quarter. In the preceding quarters it had dipped by 0.6%, 0.4% and 0.6%.

The numbers are less dramatic when you look at 2018 versus 2017, with ONS data showing investment fell by 0.4% compared with the previous year. 

“The last time business investment saw a larger fall was in 2009, when it fell by 16.6% compared with 2008,” the ONS said in a new report.

In 2017, business investment grew by 1.5%, but it shrunk by 0.2% in 2016 as companies reacted to the results of the Brexit referendum. 

READ MORE: Another Brexit referendum would be a mixed blessing for the UK economy

Investment in the transport equipment sector was particularly hard hit last year and dragged down the overall figure.

There is evidence to suggest that the recent falls in investment in transport equipment can be partially attributed to decreased investment in aircraft,” the ONS said.

READ MORE: 15% plunge in UK car production is a ‘wake-up call’ ahead of Brexit

The auto sector, in particular, has also suffered.

Recent data from the Society of Motor Manufacturers and Traders (SMMT) showed fresh inward investment in the British car sector plummeted by nearly 50% in 2018 compared with the previous year. Just under £589m was invested in the industry last year, “amid fears over the UK’s future trading prospects with the EU and other key global markets,” the SMMT said.