UK businesses lean away from capital investment and look to sustain what they have rather than grow

A recent APA (The Association of Practicing Accountants) survey reveals that 68% of business owners surveyed are unlikely to make a significant capital investment in the next 12 months.

The survey also finds that 70% of business leads believe growth is no longer the key priority for 2023, given the current economic challenges.

Capital investment is often a major driver of growth, higher margins, training a higher-skilled workforce and competitiveness. On an aggregate basis, it makes an economy chime faster and slicker. Capital Investment is fundamentally risky but brings with it the rewards that move everyone forward – business owners, in our experience, normally get these judgements right and take risks on acquiring other businesses, technology, machinery and other assets successfully.  

Three current themes compound concerns about a reduction in capital investment.

1 – Firstly, poor productivity. The ONS reported that in Q1 2023, productivity was 0.6% lower compared to a year ago (Q1 2022). The OECD also illustrates this point further when we compare other large nations in the charts below. Beyond these charts, however, one measures output – by revenue, GDP or unit output per worker, the UK suffers a competitive gap compared to other nations. 

Graph above. Productivity (GDP per hour), 2022 US$ (purchasing power parity)


Graph above.  Output per hour worked point estimate comparisons using differing methods to calculate hours worked, 2019

Source: Organisation for Economic Co-operation and Development (OECD) data, Office for National Statistics calculations


2 – Second, unemployment in the UK is very low at 4%, ONS (May 2023) combined with a significant number of unfilled vacancies, estimated at around 2 million (ONS, Feb 2023). Assuming these jobs are being advertised because they will help fulfil valuable demand and that this demand leads to positive outcomes, this means we are nearly out of capacity as a nation and are leaving trade and growth opportunities (which also means tax receipts from trade and growth) on the table as we cannot find enough people to deliver on revenue opportunities. This situation further highlights the need to find ways to work smarter, as there are no more bodies to throw at excess demand. In different circumstances, this is a ‘nice problem to have’. 

Graph above.  Unemployment rate (aged 16 and over, seasonally adjusted): %


3 – Third, the Big Mac Index, which appraises the relative value of different currencies, shows that the pound is undervalued against the dollar by around 14.8% (Economist, Big Mac Index). There is no doubt that a major export opportunity exists as buyers purchasing in dollars (which is much of the world) should find buying our goods and service cheaper. Again, in different circumstances, it could be argued that this is a ‘nice problem to have’. A critical role of any government exists to solve these issues.  

In combination, there is a significant challenge and risk that many UK companies will not feel they are in an adequately stable environment to take on the risks that keep the UK growing on all fronts; there will always be exceptional businesses taking risks, but this data suggests the bulk of the companies are understandably being cautious which both expands our economic weaknesses and misses the opportunities. 

Capital expenditure is, undoubtedly, an obvious way to increase capacity and competitiveness. Unstable economic environment, high-interest rates and weak policies – often based on short-sighted tax logic – have clearly not made businesses feel confident in investing in their companies through capital investment – both sad and a significant lost opportunity – it is rare to see such high demand. 

The APA survey highlights that over two-thirds of businesses are unlikely to make a significant capital investment in the next 12 months. The survey, conducted by the APA, surveyed 532 medium-sized owner-managed businesses.    

Graph above.  How likely are you to make a significant capital investment in your business over the next 12 months?

Source:  APA survey “Maintaining resilience in a tougher economic climate – challenges facing UK owner managed businesses in 2023: A survey from the Association of Practising Accountants.”


The UK rate of inflation has been stubbornly high for the last 18 months, and interest rate rises have had a minimal impact in reducing this – a reduction in fuel and energy prices are the drivers for reduced inflation. However, we query if, in addition to creating economic concern, interest rate rises have, in fact, turned off many businesses from taking the very capital risks needed for the UK economy to capitalise on the opportunities described above – indeed, the rate rises seem to stifle growth in the UK further and dampen competitiveness at a time when both should be pursued. 

According to the survey, businesses are planning to ‘ride the wave’ this year, with over 75% not identifying growth as a priority and instead focusing on sustaining the business or survival. This approach suggests that many business owners have resigned themselves to the economic uncertainty seeing it remain a significant challenge, with a whopping 9 in 10 business owners anticipating supply chain costs and labour costs to rise over the next 12 months – a missed opportunity.     

Graph above.  What is likely to be your main priority over the next 3-6 months?

Source:  APA survey  “Maintaining resilience in a tougher economic climate – challenges facing UK owner managed businesses in 2023: A survey from the Association of Practising Accountants.”


Should the Government intervene?

The survey also showed that many business owners felt the Government’s support for the owner-managed business sector needed improvement and that the Government and BoE could do more to tackle inflation. Only 1/3 thought that a change of Government would be good for business, suggesting that there is little confidence in any of the main political parties right now.

While many might look to government intervention to help promote capital expenditure, the understanding of how to target policy to achieve positive economic outcomes needs to catch up to the reality of businesses on the ground. Capital allowances on qualifying plant and machinery have unsurprisingly had modest take-up in an era of high borrowing costs, staff shortages and economic uncertainty. Other issues in government policy and assumptions exist too, varying from the reduction and then the removal of entrepreneurs’ relief, a series of odd public assumptions on the impact of corporation tax on growth and the purging of R&D tax credits at a time when the UK relatively under invests in innovation as a percentage of GDP all highlight how the patchwork set of policies and assumptions have not aided the situation.

We hope Government can solve this and provide a package of policies to support businesses in the short term – the opportunities that exist are lucrative and immediate.  

How will this likely play out?

As reported in our blog on Foreign Direct Investment, the UK remains an attractive economy for overseas investment. The M&A Attractiveness Index published by Bayes Business School has ranked the UK 3rd globally, making it one of the top targets for inbound and domestic investment in Europe, behind the US and Singapore. 

However, the APA survey and recent economic data both support the view that we must up the pace and efficiency of the UK machine by improving the conditions and confidence of those business leaders that will take the real risks that underpin growth and success. 

APA Survey 2023

You can download the full findings of the APA survey here.

Maintaining resilience in a tougher economic climate – challenges facing UK owner-managed businesses in 2023: A survey from the Association of Practising Accountants.




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We always recommend that you seek advice from a suitably qualified adviser before taking any action. The information in this article only serves as a guide and no responsibility for loss occasioned by any person acting or refraining from action as a result of this material can be accepted by the authors or the firm.

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