(Bloomberg) -- Britain has trailed all other major advanced economies for investment in 24 of the last 30 years, with dire consequences for productivity and living standards, new analysis shows. 

The Institute for Public Policy Research estimated the UK would have received an extra £1.9 trillion ($2.4 trillion) in real terms had investment from private firms and the government stayed at the Group of Seven average in the last three decades. Instead, the last time UK investment matched G-7 levels was in 1990, with Britain at the bottom of the league table for a third successive year in 2022.

The findings underscore the challenges awaiting the next government after the July 4 general election. Both the ruling Conservatives and opposition Labour Party have committed to lifting Britain’s underlying growth rate.

 

“The UK’s dire productivity performance is the single biggest driver of our dire living standards,” said George Dibb, associate director for economic policy at IPPR. “Without resources flowing into new investment, it’s hard to see how UK economic performance can improve.” 

The task of delivering on their economic promises is likely to fall to Labour, which has a commanding lead over the Tories in opinion polls. If elected, leader Keir Starmer and his team will be under pressure to fix the “productivity puzzle” that has dogged the economy since the financial crisis. 

The figures covered by the IPPR include investment by private firms and the government. Britain fares better when it comes to foreign direct investment, where it is the top destination after the US measured by the value of projects. 

International investors have turned more upbeat about the UK thanks to the return of relative stability following the economic and political upheavals since the pandemic. 

At home, the UK has been dragged down by low levels of private investment in things like factories, equipment or innovation as a share of GDP. Britain ranked 28th out of the 31 OECD members for business investment in 2022. Only Greece, Luxembourg, and Poland had lower scores.

The IPPR warned that both the Labour and Conservative pitches to voters imply falls in public investment. Whoever wins, it said, should prioritize public investments in education, infrastructure and health care to foster growth and help steer private-sector funds into industries like electric vehicles and renewable energy.

That will require getting behind a long-term green industrial strategy, redesigning fiscal rules to remove constraints on productive government investment and establishing benchmarks that set out how much is needed to achieve public investment goals. 

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