UK business investment rises strongly

LONDON – British business investment rose strongly in the second quarter to lift total spending above 30 billion pounds for the first quarter since records began in 1966.

The figures provide further evidence that Britain’s economy is gathering pace and confirm the Bank of England’s view that business investment is picking up after a subdued performance in 2005. Official data yesterday showed business investment rose 1,7 per cent in the second quarter to stand 4,2 per cent up on the same period a year earlier.This matched the growth rate seen in the first quarter and means that business investment has now risen for six consecutive quarters.In its inflation report earlier this month, the Bank of England cited a positive outlook for business investment as one of the reasons it had become more optimistic on Britain’s growth prospects.”The Inflation Report acknowledged that following subdued growth in the second half of last year, business investment had recovered,” said George Johns at Barclays Capital.”Today’s firm outturn suggests the Monetary Policy Committee was right to take that view.”Britain’s central bank is forecasting growth of 2,8 per cent this year – well above the Treasury’s forecast of two to 2,5 per cent.Thursday’s data will provide comfort to British policymakers, many of whom have questioned why businesses were being slow to invest in an environment of strong corporate profitability and low interest rates.Some have blamed underfunded corporate pension schemes, while others have cited concerns over rising energy costs.Nampa-ReutersOfficial data yesterday showed business investment rose 1,7 per cent in the second quarter to stand 4,2 per cent up on the same period a year earlier.This matched the growth rate seen in the first quarter and means that business investment has now risen for six consecutive quarters.In its inflation report earlier this month, the Bank of England cited a positive outlook for business investment as one of the reasons it had become more optimistic on Britain’s growth prospects.”The Inflation Report acknowledged that following subdued growth in the second half of last year, business investment had recovered,” said George Johns at Barclays Capital.”Today’s firm outturn suggests the Monetary Policy Committee was right to take that view.”Britain’s central bank is forecasting growth of 2,8 per cent this year – well above the Treasury’s forecast of two to 2,5 per cent.Thursday’s data will provide comfort to British policymakers, many of whom have questioned why businesses were being slow to invest in an environment of strong corporate profitability and low interest rates.Some have blamed underfunded corporate pension schemes, while others have cited concerns over rising energy costs.Nampa-Reuters