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23 December 2008 UK business investment falls

UK businesses invested much less than expected in the period from July to September, new figures have shown.

According to the Office for National Statistics, investment dropped by 1.3% from the previous quarter – far below previous estimated reductions of 0.2% and 0.5%.

Many firms have scaled back investment in an attempt to reduce costs during the credit crunch. Experts claim this, coupled with banks’ reluctance to lend to small enterprises, has contributed to the fall.

‘It's sad that the support of the banking fraternity is not there. If the banks aren't on board, businesses cannot invest,’ said Stephen Alambritis at the Federation of Small Businesses.

The Bank of England has cut interest rates from 5.5% to 2% in recent months and put pressure on High Street banks to lend businesses more cash.

However, while levels of investment fell overall, an increase in new building work by private companies meant manufacturing investment actually increased by 2.3%.