Business investment in the UK: October to December 2022 provisional results

• UK business investment rose by 4.8% in Quarter 4 (Oct to Dec) 2022 and is 13.2% above where it was the same quarter a year previous.

• The level of business investment in Quarter 4 2022 has neared that of Quarter 4 2019, the quarter before the coronavirus (COVID-19) pandemic.

• Business investment increased by 9.9% in 2022 following a 0.9% increase in 2021.

• Whole economy investment (technically known as gross fixed capital formation (GFCF)), which includes business and public sector investment, increased by 1.5% in Quarter 4 2022 and was 7.7% above where it was in the same quarter a year previous.

• GFCF in Quarter 4 2022 was 3.7% above its pre-coronavirus (Quarter 4 2019) levels.

Business investment in the UK rose by 4.8% in Quarter 4 (Oct to Dec) 2022 following a revised 3.2% fall in the previous quarter. Positive contributions from information and communication technology (ICT) equipment and other machinery and equipment, transport equipment, and other buildings and structures caused business investment to exceed pre-coronavirus (COVID-19) levels after 11 quarters below this level.

The primary drivers of growth in Quarter 4 2022 were transport, ICT equipment and other machinery and equipment, and other buildings and structures. Transport made the largest contribution to growth this quarter, driven by the air and water transport industries as well as vehicle rental. Other machinery, and buildings investment also increased this quarter, with increases being seen across all industries. Intellectual property products (IPP) were the only asset that contributed negatively to business investment in Quarter 4 2022.

Whole economy investment (technically known as gross fixed capital formation (GFCF)) increased by 1.5% in Quarter 4 (Oct to Dec) 2022 following a 0.3% increase in the previous quarter.

Compared with Quarter 4 2021, GFCF increased by 7.8%, while business investment increased by 13.2% as the disparity between business investment and GFCF decreased. GFCF is now 3.7% above where it was in Quarter 4 2019 (the pre-coronavirus (COVID-19) quarter).

Figure 1: The disparity between gross fixed capital formation (GFCF) and business investment reduced as business investment returned to pre-coronavirus (COVID-19) levels

UK business investment and whole economy investment, chained volume measure, seasonally adjusted, Quarter 1 (Jan to Mar) 1997 to Quarter 4 (Oct to Dec) 2022

Notes:

1. Q1 refers to Quarter 1 (Jan to Mar), Q2 refers to Quarter 2 (Apr to June), Q3 refers to Quarter 3 (July to Sept) and Q4 refers to Quarter 4 (Oct to Dec).
2. UK business investment, chained volume measure, seasonally adjusted, excluding the reclassification of British Nuclear Fuels (BNFL) in Quarter 2 2005.
3. Quarter 2 2020 was the largest fall on record for gross fixed capital formation excluding the reclassification of British Nuclear Fuels (BNFL) in Quarter 2 2005.
4. Index is referenced to Quarter 1 (Jan to Mar) 1997 = 100.

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GFCF growth in the latest quarter was largely driven by the same factors as business investment, though dwellings investment fell by 3.2% from Quarter 3 (July to Sept) 2022; this was slightly offset by a 1.8% increase in government investment. Two years on from the pre-coronavirus (Quarter 4 2019) quarter, other buildings and structures, intellectual property products (IPP), and private sector costs of ownership transfers are the only components still below their pre-coronavirus level.

Transport equipment has seen the largest investment growth of all assets, both this quarter and compared with its pre-coronavirus level. Transport equipment increased by 27.5% in Quarter 4 2022 and was 70.2% above Quarter 4 2019 levels. Transport investment can be particularly volatile because of the high value of some transport equipment, such as ships and aircraft, so movements of this size are not unusual.

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

In August 2022 we reviewed the methods used for estimating data from the Quarterly Acquisitions and Disposals of Capital Assets Survey (QCAS). The imputation review found that the methods used were up to standard and no changes were made.

Revisions

In line with the National Accounts Revisions Policy, the earliest period open to revision in this publication is Quarter 1 (Jan to Mar) 2022.

Data within this bulletin

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

In Quarter 4 (Oct to Dec) 2022, the Quarterly Acquisitions and Disposals of Capital Assets Survey (QCAS), the largest data source for gross fixed capital formation (GFCF) and business investment, had a response rate of 57.7% for estimates used in the provisional release.

Adjustments

Large capital expenditure tends to be reported later in the data collection period than smaller capital expenditure. This means that larger expenditures are often included in the revised (month 3) results but are not reported in time for the provisional (month 2) results. This can lead to a tendency toward upward revisions in the later estimates for business investment and gross fixed capital formation (GFCF). Following investigation of the impact of this effect, from Quarter 3 (July to Sept) 2013, a bias adjustment was introduced in the provisional estimate.

This adjustment was suspended in Quarter 2 (Apr to June) 2020 because of uncertainties surrounding the effect of the coronavirus (COVID-19) pandemic. However, since Quarter 4 (Oct to Dec) 2021, after further investigation and analysis of its impact, the bias adjustment was reintroduced to business investment and GFCF. The bias adjustment for this provisional release is £1.8 billion. This partially reflects the slightly weaker response in the latest quarter.