Box sets » GDP by expenditure » Business investment
A key uncertainty around the long-run impact of the Budget's plans for higher public investment is the extent to which the public capital stock is a complement to (or substitute for) business investment. This Box provided scenarios in which the future business capital stock was higher or lower than we had assumed in our central forecast. We showed these scenarios' impacts on potential output in 50 years' time and the implications they had for different measures of the internal rate of return on investment.
Since the June 2016 EU referendum, our forecasts have incorporated a set of assumptions about the economic impact of Brexit on trade, productivity, investment, and migration. In this box, we assessed our current assumptions against the latest evidence.
In each Economic and fiscal outlook we publish a box that summarises the effects of the Government’s new policy measures on our economy forecast. These include the overall effect of the package of measures and any specific effects of individual measures that we deem to be sufficiently material to have wider indirect effects on the economy. In our March 2021 Economic and fiscal outlook, we adjusted our economy forecast to take into account plans to loosen fiscal policy in 2021-22, before tightening from 2023-24 onwards, as well as for several specific measures, including the impact on our business investment forecast of temporarily much more generous capital allowances.
This box explored how the pandemic and associated policy response changed the flow of funds between the different sectors of the UK economy. It then considered the implications of how those flows unwind for the pace and sustainability of the recovery.
On 31 January 2020, the UK left the EU and the transition period was set to finish at the end of 2020. This box set out our estimate of the effect of the EU referendum result on productivity to date. It also outlined the effect that leaving the EU and trading under the terms of a typical free trade agreement - which we assumed in this forecast - will have on productivity in the long run.
In each Economic and fiscal outlook we publish a box that summarises the effects of the Government’s new policy measures on our economy forecast. These include the overall effect of the package of measures and any specific effects of individual measures that we deem to be sufficiently material to have wider indirect effects on the economy. In our March 2020 Economic and fiscal outlook, we adjusted our economy forecast to account for the material increase in departmental spending and tax policy changes on GDP and inflation. In addition to this, our business investment forecast incorporates the reversal of the planned cut in corporation tax, increases in the structures and buildings allowance and R&D tax credits.
In each Economic and fiscal outlook we publish a box that summarises the effects of the Government’s new policy measures on our economy forecast. These include the overall effect of the package of measures and any specific effects of individual measures that we deem to be sufficiently material to have wider indirect effects on the economy. In our October 2018 Economic and fiscal outlook, economy forecast adjustments included the effects of looser fiscal policy on GDP and inflation, the effects of capital allowances on business investment, the effects of tax policy changes on inflation and the effects of the extension of the Help to Buy scheme on the housing market.
In the November 2016 EFO we made a number of judgements about how the vote to leave the EU would effect the economy in the near-term. This box from our March 2018 EFO compared these judgements against the outturn data that we had received since then, finding that most of these judgements were broadly on track.
The outlook for productivity growth is one of the most important and yet uncertain areas of our economy forecast. In this box from our March 2018 EFO we looked at how actual productivity growth can be broken down into contributions from capital deepening and total factor productivity (TFP) growth and how differences in investment across countries could be related to post-crisis productivity performance.
Our first post-EU referendum forecast in November 2016 assumed that leaving the EU would result in a less open economy and lower productivity, but we did not incorporate an explicit link between the two over our medium-term forecast horizon. This box from our March 2018 EFO discusses why we did not include this link and what other forecasters have assumed.
All elements of GDP data are subject to revision, which creates one source of uncertainty in our forecasts. Business investment data are particularly prone to revision. In this box from our March 2017 Economic and fiscal outlook we looked at past revisions in business investment data and compared the volatility and average revision of UK data with those produced by other countries.
In our November 2016 forecast, our first following the June 2016 referendum, we revised down our potential growth forecast, primarily reflecting the effect of weaker business investment on productivity growth. To give some context to our central forecast judgements, this box outlined a number of channels through which the decision to leave the EU could affect potential output and the uncertainty associated with estimating these effects.
In each Economic and fiscal outlook we publish a box that summarises the effects of the Government’s new policy measures on our economy forecast. These include the overall effect of the package of measures and any specific effects of individual measures that we deem to be sufficiently material to have wider indirect effects on the economy. In our March 2016 Economic and Fiscal Outlook, we made a number of economy forecast adjustments to GDP, business investment, wage growth, inflation and the housing market.
In each Economic and fiscal outlook we publish a box that summarises the effects of the Government’s new policy measures on our economy forecast. These include the overall effect of the package of measures and any specific effects of individual measures that we deem to be sufficiently material to have wider indirect effects on the economy. In the July 2015 Economic and fiscal outlook, we made a number of adjustments to real and nominal GDP, the labour market, inflation, business and residential investment, and the housing market.
The data available at the time of our March 2015 Economic and fiscal outlook showed the current account deficit had worsened to around 6 per cent of GDP in the third quarter of 2014, one of the largest quarterly deficits on record. Much of the recent deterioration was down to the income balance moving into deficit, the drivers of which were discussed in this box.
In recent years, historical path of business investment has been subject to significant revisions. This box discussed the revisions made to business investment estimates between 2007 and 2014. In Box 3.6 of our March 2014 Economic and fiscal outlook, we considered this issue from an international perspective.
In each Economic and fiscal outlook we publish a box that summarises the effects of the Government’s new policy measures on our economy forecast. These include the overall effect of the package of measures and any specific effects of individual measures that we deem to be sufficiently material to have wider indirect effects on the economy. In our December 2014 Economic and Fiscal Outlook, we made adjustments to property transactions and residential investment in light of reforms to stamp duty land tax
In each Economic and fiscal outlook we publish a box that summarises the effects of the Government’s new policy measures on our economy forecast. These include the overall effect of the package of measures and any specific effects of individual measures that we deem to be sufficiently material to have wider indirect effects on the economy. In our March 2014 Economic and Fiscal Outlook, we made adjustments to inflation and business investment.
In the late-2000s recession, total investment in the UK fell by more than in other similarly-developed economies, but in the March 2014 forecast we expected it to pick up strongly. This box considered possible reasons for the previous weakness and compared the investment-to-GDP ratio in our forecast against OECD averages.
In each Economic and fiscal outlook we publish a box that summarises the effects of the Government’s new policy measures on our economy forecast. These include the overall effect of the package of measures and any specific effects of individual measures that we deem to be sufficiently material to have wider indirect effects on the economy. In our March 2013 Economic and Fiscal Outlook, we made adjustments to our forecasts of real GDP, business investment and inflation
In each Economic and fiscal outlook we publish a box that summarises the effects of the Government’s new policy measures on our economy forecast. These include the overall effect of the package of measures and any specific effects of individual measures that we deem to be sufficiently material to have wider indirect effects on the economy. In our March 2012 Economic and Fiscal Outlook, we made adjustments to our forecasts of real GDP, business investment and inflation.
UK GDP had grown less quickly in 2010-11 than the OBR forecast in June 2010. This box decomposed the forecast error by expenditure component and discussed possible explanations, including the external inflation shock.
In each Economic and fiscal outlook we publish a box that summarises the effects of the Government’s new policy measures on our economy forecast. These include the overall effect of the package of measures and any specific effects of individual measures that we deem to be sufficiently material to have wider indirect effects on the economy. In our November 2011 Economic and Fiscal Outlook, we made adjustments to our forecasts of inflation and property transactions.
The corporate sector had run a significant surplus of profits over investment since 2003, and this surplus rose sharply following the crisis. This box explored some of the possible reasons for this, including the possibility that businesses may have used this to build up a buffer against future shocks. The box also discussed the uncertainties around the existing data, which may have overstated corporates' holdings of cash reserves.