Despite encouragement from the Government for corporate activity, Friday’s figures are expected to reveal that companies are not spending. It was hoped that by slashing employers’ National Insurance contributions and corporation tax, business owners would feel more comfortable to spend more.
Following a brief bounce back to growth following the fall from 13 percent to 10 percent of Gross Financial Expenditure during the recession, BarCap claim that spending is now virtually at its record lowest level and is therefore heading back down.
However, in contrast to these reports the Office for Budget Responsibility expects business investment to expand by 6.7 percent this year and contribute a third of total growth. Trade is expected to deliver the bulk of the rest.
In May, Deputy Prime Minister Nick Clegg called on businesses "to do your bit, too ... expand and invest" to secure the recovery.
Chris Leslie, Labour's Shadow Treasury Minister, said: "The Chancellor banked on business investment and exports to counter his cuts but his reckless plan isn't working.”
The Department for Business, Innovation and Skills said: "The Government has set out an ambitious path for growth ... creating the right conditions for businesses to start up, invest and grow."
David Kern, chief economist at the British Chambers of Commerce, explained that business will only start to see improvements to growth when confidence in both consumers and exports improve.
"Although business investment will eventually come back, in the short term there is no great argument as demand is going to be low," he said.
For more information, please contact Glazers, Chartered Accountants London or visit www.glazers.co.uk
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