Business investment in the UK: July to September 2022 provisional results

• Business investment fell by 0.5% in Quarter 3 (July to Sept) 2022.

• The level of business investment in Quarter 3 2022 is 8.4% below where it was in Quarter 4 (Oct to Dec) 2019, the quarter before the coronavirus (COVID-19) pandemic; gross fixed capital formation (GFCF) levels are 0.8% above that same quarter.

• Whole economy investment, which includes business and public sector investment, increased by 2.5% in Quarter 3 2022 and was 5.8% higher than in the same quarter a year ago.

• Most assets contributed positively to growth in whole economy investment, with the largest contribution coming from dwellings with a growth of 4.2%. Transport equipment was the only negative contributor to whole economy investment growth.

• Government investment grew by 7.6% in the latest quarter. Other buildings was the main driver behind the growth in government investment.

Business investment has still not returned to pre-coronavirus (COVID-19) pandemic levels while whole economy investment (technically known as Gross Fixed Capital Formation - GFCF) has returned to pre-pandemic levels as of Quarter 3 2022. This reflects the different patterns of investment by government and businesses observed throughout the coronavirus pandemic (Figure 2). The positive growth of dwellings and government investment in the latest quarter are the main factors in GFCF returning to its pre-coronavirus (COVID-19) pandemic level.

While the majority of GFCF components have returned to Quarter 4 2019 levels, GFCF in other buildings and structures (which includes non-residential buildings and structures such as roads, bridges and energy-related structures) has not, and remains 10.7 percentage points lower than its pre-coronavirus pandemic level. The low level of business investment in other buildings and structures is the main reason for whole economy other buildings and structures being weaker than its pre-coronavirus pandemic level.

Dwellings continued to grow and exceeded its pre-coronavirus pandemic level in Quarter 4 (Oct to Dec) 2021. Dwellings investment increased by 4.2% in Quarter 3 (July to Sept) 2022. Repair and maintenance of dwellings continues to grow but at a slower rate than seen during the pandemic when many took the opportunity to complete home improvements. New housing investment continues to grow with large housebuilders pushing through on projects in order to complete before the year end.

Transport equipment has fallen by 4.2% in Quarter 3 2022 yet remains above its pre-coronavirus pandemic level. Transport equipment continues to fluctuate as manufacturers report varied success in acquiring parts and materials needed to complete cars and other transport equipment according to respondent comments to our Quarterly Acquisitions and Disposals of Capital Assets Survey (QCAS).

Investment in ICT equipment and other machinery and equipment exceeded pre-pandemic levels in Quarter 1 (Jan to Mar) 2022 and continues its quarter-on-quarter growth with a growth of 4.1% in Quarter 3 (July to Sept) 2022.

This period coincides with the availability of temporary tax relief on qualifying capital asset investment, known as "super-deduction", as explained on the GOV.UK website. Even though there are some differences in qualifying items, the impact of this incentive is most likely to be reflected in information and communication technology (ICT) equipment, and other machinery and equipment. There has however been little reference to this temporary tax relief in respondent comments to our Quarterly Acquisitions and Disposals of Capital Assets Survey (QCAS).

The themes in respondent comments to our Quarterly Acquisitions and Disposals of Capital Assets Survey (QCAS) have changed substantially since the quarters after the EU Exit and coronavirus (COVID-19) pandemic. Now only 0.6% of all comments mention the EU compared with the peak of 2.8% in Quarter 3 (July to Sept) 2019. Coronavirus comments make up just 1% of all comments compared with the peak of 49% of all comments in Quarter 2 (April to June) 2022. Comments mentioning uncertainty remain a factor with 3.7% of respondent comments mentioning it. Continued trends include the mention of investing in ICT and machinery as well as investment in cars.

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

Revisions

In line with the National Accounts Revisions Policy, the only period open in this publication is Quarter 3 (July to Sept) 2022.

Data within this bulletin

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

In Quarter 3 (July to Sept) 2022, the Quarterly Acquisitions and Disposals of Capital Assets Survey (QCAS), one of the largest data sources for gross fixed capital formation (GFCF) and business investment, had a response rate of 62.4% for estimates used in this provisional release. This compares with an average provisional response rate of 57.7% during 2021, 56.5% during 2020, and 67.3% for 2019.