Real terms business investment has not fallen by 20% since Brexit

An article printed in the Daily Mirror newspaper on 7 September 2022 notes that during her first speech as Prime Minister, Liz Truss made “no mention of business investment being down 20% since Brexit”.

This figure refers to how current real terms business investment compares with what it might have been had it continued along its pre-referendum trajectory, and not how business investment has actually changed since the 2016 EU referendum.

In reality, business investment has seen a real terms decrease since 2016, but to a much smaller extent than the article in the Mirror suggests.

Real terms vs predicted trend growth

The Mirror confirmed its source was a blog post published on 31 May 2022 by the Information Technology & Innovation Foundation (ITIF), which in turn cited a graph shared on Twitter by BBC Newsnight’s economics editor Ben Chu.

The data in the graph came from the Office for National Statistics (ONS), and shows the amount of business investment, adjusted to remove the effect of price changes (inflation) over time, and the effect of seasonal variation. For these reasons the ONS recommends using this data to compare investment over time.

The graph in question showed that UK business investment at the beginning of 2022 was about 35% lower, in real terms, than where it would be, had it grown at the rate it was growing between 2010 and 2015.

However, it isn’t certain that this trend would have been realised had the UK voted to remain in the EU.

Full Fact understands that the Daily Mirror said business investment had decreased by 20%, rather than 35%, in reference to the difference between investment in early 2020 and where it may have been in early 2020 if the pre-referendum trend had continued (21.7%). 

The ITIF presented this comparison to show that, even excluding the impact of Covid-19, which it noted “contributed to business uncertainty and depressed business investment further”, investment growth in the UK has slowed considerably over the second half of the 2010s. 

Business investment has decreased since the EU referendum

According to figures published by the ONS, business investment has decreased in real terms since the EU referendum took place, but not by as much as 20%.

Between Q2 2016—which ended one week after the 23 June referendum—and Q2 2022, business investment fell by approximately 6% in real terms, from £56.9bn to £53.4bn.

This includes a steep drop during the Covid-19 pandemic, with business investment yet to recover to pre-pandemic levels. During the period between the EU referendum and the Covid-19 pandemic, business investment remained largely flat after steady growth from 2010-2015.

Image courtesy of João Barbosa