I’ve heard foreign investment may be drying up, but what does that actually mean for me and my business?
The ICAEW (Institute of Chartered Accountants in England and Wales) keeps track of both foreign and domestic investment in the UK, and they have noticed a sharp downturn in overall investment in UK businesses. This of course has resulted in UK businesses cutting their spending, and could slow the economy badly if it continues.
By the numbers, everyone was hoping for overall UK business investment to grow by more than 7% this year. Now it is expected to grow by no more than 5.2%, probably less. The current government has based their plans for Britain’s economic recovery on an increase in foreign investment, so this could be bad news for us all – especially larger businesses that were hoping to attract investment in order to expand.
So why is this happening?
The easiest scapegoat is the Greek financial crisis, but this latest round of trouble hasn’t come as a surprise to anyone, so it can’t really be the only thing behind these officially lowered expectations. The falling price of crude oil may be more of a factor. Whilst we haven’t seen substantially lower prices at the pumps, the oil and gas industry in general is selling at lower prices, and has cut their spending dramatically to compensate. China’s economy is contracting right now as well, so the overall international money atmosphere is one of caution. Investment is just harder to come by worldwide.
And what does it all mean for me?
The UK outlook isn’t as bad as it may sound, especially for SMEs. The same accountancy organisation which made these dire pronouncements admits that falling oil prices and an expected rise in the average UK consumer’s buying power actually work to most people’s advantage, at least at the consumer level. The average UK worker, will be £400 better off in 2015 than they were in 2014, something that hasn’t happened in many years now. Even if the government’s investment-led recovery plans stall out at the big business level, the increased buying power of Britain’s consumers could fuel a lot of expansion at the small business level.
Thanks for reading, Paul