Deloitte Forecasts £200bn Investment Boom for UK
The UK’s biggest businesses are ready to invest £200bn over the next two years in order to reap the benefit of a recent upturn in economic growth, according to Deloitte.
A survey by the accountant suggested that 80% of UK companies with annual turnover of £1bn and above plan to invest in staff and technology this year, with nearly 70% allocating at least £250m of investments to drive growth.
Deloitte estimates that businesses will invest up to £90bn in 2014 and a further £107bn next year. The firm added that the renewed appetite for investment would not deter companies from returning cash to shareholders, with 58% of the 132 executives responding to the survey saying they will pay dividends or buy back shares.
Tom Brennan, vice president of marketing for enterprise resource planning (ERP) specialist FinancialForce.com called the news “extremely positive for the business landscape.”
“However, it is crucial that this finance is invested in the right areas in order to guarantee the benefits are fully felt,” he added. “Traditionally, the ‘right investment’ would have focussed on making a company more cost or business process-centric, but, the growth of a digital world and customer-based economy in which competitors are just a click away, means it is now imperative that any investment focuses on the customer experience.”
The Deloitte study follows a sharp revision by the UK’s Office of National Statistics (ONS) to the scale of British business investment last year. Until recently the ONS predicted that investment by corporates had fallen in 2013, but last week it adjusted its estimate to an increase of 8.5%.
The balance of those preparing to invest was skewed towards privately held firms, which have a reputation for taking a longer-term view of profitability than listed companies, which must produce quarterly profit figures. The Deloitte survey found that over 70% of unlisted businesses indicated they would invest in 2014 and 2015, compared with 26% of listed firms.
David Sproul, chief executive (CEO) of Deloitte UK, said: “Over the last 12 to 18 months the steadily improving economy has led to an increase in corporate risk appetite. However, that has not yet translated into the level of investment policymakers had hoped for.
“In 2013, businesses invested just £3bn more than they did in 2009. A well-balanced recovery requires a significant rise in corporate investment and a shift away from consumer-led growth.
“This investment is much needed and with the Office for Budget Responsibility [OBR] also forecasting a 50% increase in capital spending over the next five years, all the signs are that it is on its way.”