Business investment in the UK: October to December 2023 revised results

• UK business investment increased by 1.4% in Quarter 4 (Oct to Dec) 2023, revised slightly from our initial estimate of a 1.5% increase in the provisional estimate; the main contributor to business investment growth was an increase in buildings investment.
• UK business investment is 2.8% above where it was the same quarter a year ago.
• Annual UK business investment increased by 5.5% in 2023, revised down from a 6.1% increase in the provisional estimate.
• UK whole economy investment (technically known as gross fixed capital formation (GFCF)), which includes business and public sector investment, increased by 0.9% in Quarter 4 2023, revised down from a 1.4% increase in the provisional estimate.
• UK GFCF is 0.5% above where it was the same quarter a year ago.
• Annual UK GFCF increased by 2.2% in 2023, revised down from a 2.9% increase in the provisional estimate.

This publication contains the latest updates to UK business investment and UK whole economy investment (technically known as gross fixed capital formation (GFCF)), which includes business and public sector investment data. Data are open to revision from Quarter 1 (Jan to Mar) 2023 to Quarter 4 (Oct to Dec) 2023 in this publication.

Figure 1: Gross fixed capital formation (GFCF) and business investment both increased in Quarter 4 2023

UK business investment and whole economy investment, chained volume measure, seasonally adjusted, Quarter 1 (Jan to Mar) 1997 to Quarter 4 (Oct to Dec) 2023

Notes:

1. Q1 refers to Quarter 1 (Jan to Mar), Q2 refers to Quarter 2 (Apr to June), Q3 refers to Quarter 3 (July to Sept) and Q4 refers to Quarter 4 (Oct to Dec).
2. UK business investment, chained volume measure, seasonally adjusted, excluding the reclassification of British Nuclear Fuels (BNFL) in Quarter 2 2005.
3. Quarter 2 2020 was the largest fall on record for gross fixed capital formation excluding the reclassification of British Nuclear Fuels (BNFL) in Quarter 2 2005.

4. Index is referenced to Quarter 1 (Jan to Mar) 1997 = 100.

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Business investment

UK business investment increased by 1.4% in Quarter 4 2023, and annual UK business investment increased by 5.5% in 2023.

Most of the Quarter 4 2023 growth was driven by buildings investment, as well as a smaller positive contribution from transport growth.

UK business investment levels in Quarter 4 2023 remain below those seen in the first half of the year; the Bank of England Monetary Policy Report reported investment plans being held back by economic uncertainty, and by the cost and availability of finance.

Annual business investment growth in 2023 was driven by positive contributions from transport and buildings. Also, business investment was stronger in Quarter 1 2023 owing to the end of the temporary tax relief on qualifying capital asset investment, known as super-deduction on 31 March 2023. This provided an incentive to bring forward investment that would have been planned for a later date.

Whole economy investment

UK GFCF increased by 0.9% in Quarter 4 2023, and annual UK GFCF increased by 2.2% in 2023. The primary driver behind this growth was other buildings contributing 0.9 percentage points, with small positive and negative contributions from the other components highlighted by Figure 2.

Private investment in buildings contributed to most of the growth in buildings investment in the latest quarter, as business investment drivers were the main source of GFCF growth.

Transport was the largest contributor to annual UK GFCF in 2023, with additional positive contributions from information and communication technology (ICT) and other machinery and equipment, intellectual property products (IPP), and buildings. This was partially offset by negative contributions from dwellings. There was also additional strength from business investment in Quarter 1 2023 owing to the end of the super-deduction tax relief.

Transport in 2023 saw growth in air transport, this was elevated in Quarter 2 (Apr to June) 2023 owing to increased investment in aircraft, but there has also been longer term strength in the industry from the second half of 2022. Transport investment can be particularly volatile because of the high value of some transport equipment. Additionally, there was an increase in vehicle purchases throughout 2023. Comments showed rental car firms fulfilled a backlog of orders from the coronavirus (COVID-19) pandemic as vehicles became more readily available, and SMMT data showed a 17.9% increase in car registrations from December 2022 to December 2023. The increase in car registrations was driven entirely by fleet investments, which increased 38.7% year on year.

Business investment

UK business investment for Quarter 4 (Oct to Dec) 2023 has been revised down to a 1.4% increase in this revised release from 1.5% in the provisional estimate. This revision was caused by downward contributions from transport, and information and communication technology (ICT) equipment and other machinery and equipment, and offset by an upwards contribution from intellectual property products (IPP). These revisions are mostly the result of later survey data.

Whole economy investment

UK whole economy investment (technically known as gross fixed capital formation (GFCF)), which includes business and public sector investment, was revised down to a 0.9% increase in the Quarter 4 2023 revised release from 1.4% in the provisional estimate. This downwards revision is the result of small cumulative downwards revisions in transport, ICT equipment and other machinery and equipment, IPP, and buildings. Additionally, there was a small upwards revision in dwellings.

There were also downwards revisions of 0.3 percentage points to Quarter 1 (Jan to Mar) and Quarter 2 (Apr to Jun) 2023. In Quarter 1 2023, this was mostly the result of a downwards revision to dwellings and in Quarter 2 2023, this was caused by smaller downwards revisions to ICT equipment and other machinery and equipment, IPP, and buildings.

Using data collated by the Organisation for Economic Co-operation and Development (OECD) from relevant national statistical institutes, we can compare whole economy investment (labelled gross fixed capital formation (GFCF) in OECD data tables) within the G7 nations. Figure 4 shows annual whole economy investment for the G7 nations indexed to 2019=100, back to 2019.

UK GFCF increased by 2.2% in 2023, the second largest increase among the G7 nations, surpassed only by Italy at 4.9%. UK GFCF had the largest fall of the G7 nations in 2020 at negative 10.8%, but has since had three consecutive years of positive growth. Average GFCF growth in the UK since 2019, the pre-coronavirus (COVID-19) pandemic year, has been similar to that of France and the United States.

Quality and methodology information on strengths, limitations, appropriate uses, and how the data were created is available in the Business investment Quality and Methodology Information (QMI).

Revisions

In line with the National Accounts Revisions Policy, the earliest period open for revision in this publication is Quarter 1 (Jan to Mar) 2023.

Data within this bulletin

All data within this bulletin, unless specified, are presented in chained volume measure (CVM). This means it has the effect of price changes removed (in other words, the data are deflated).

In Quarter 4 (Oct to Dec) 2023, the Quarterly Acquisitions and Disposals of Capital Assets Survey (QCAS), the largest data source for gross fixed capital formation (GFCF) and business investment, had a response rate of 77.2% for estimates used in the revised release.

Adjustments

Large capital expenditure tends to be reported later in the data collection period than smaller capital expenditure. This means that larger expenditures are often included in the revised (month 3) results but are not reported in time for the provisional (month 2) results. This can lead to a tendency toward upward revisions in the later estimates for business investment and GFCF. Following investigation of the impact of this effect, from Quarter 3 (July to Sept) 2013, a bias adjustment was introduced in the provisional estimate.

This adjustment was suspended in Quarter 2 (Apr to June) 2020 because of uncertainties surrounding the effect of the coronavirus (COVID-19) pandemic. However, since Quarter 4 2021, after further investigation and analysis of its impact, the bias adjustment was reintroduced to business investment and GFCF. The bias adjustment, as is usual, has been removed for the revised release.