Fourth-quarter investment up

Business investment for the fourth quarter of 2007 was 1.8 per cent higher than the previous quarter, according to the latest data.

Investment was up 5.3 per cent compared to last year. The rise was largely due to increased spending in private sector non-manufacturing, the Office for National Statistics (ONS) said.

Within this, there was increased investment within distribution (up 5.2 per cent), and other services (up 1.6 per cent) but reduced investment within construction (down 4.2 per cent) and other production (down 1.7 per cent.)

By asset, the increase in private sector manufacturing investment was driven by higher capital expenditure on vehicles (up 28.4 per cent), and new building work (up eight per cent).

The 1.8 per cent quarter-on-quarter increase is a sharp upward revision from a previously reported 0.5 per cent quarter-on-quarter decline.

Howard Archer from Global Insight said: “Despite the much more encouraging picture of business investment in the fourth quarter of 2007, it still seems highly likely that it will soften significantly through 2008 in the face of tighter lending conditions, markedly softer final demand, weakening profitability and lower business confidence reflecting heightened concerns and uncertainties over the economic outlook.”

Meanwhile, total net investment by insurance companies, pension funds and trusts was provisionally estimated to be £11.3 billion in the fourth quarter of 2007, £29.6 billion lower than the high figure for the third quarter of 2007.

There was a decrease of £16.7 billion in net investment in UK company securities, going from a net investment of £5.2 billion in quarter three to a net disinvestment of £11.5 billion in quarter four.

The value of overseas securities fell by £13.2 billion, while net investment in short-term assets decreased by £7.1 billion. These decreases were partly offset by an increase in net investment in other assets of £3.6 billion and decreased net disinvestment in British government sterling securities of £3.8 billion.