UK Investment G7: Britain Records Lowest Level Under Starmer

Britain has recorded the weakest investment performance among the world’s leading economies, with UK investment G7 Starmer figures showing the country at the bottom of the group, dealing a major blow to Prime Minister Sir Keir Starmer’s plans to revive economic growth and restore long-term investor confidence.

According to data released by the Office for National Statistics, total investment by government and businesses stood at just 18.6 per cent of gross domestic product in the three months to September. This figure places the UK at the bottom of the G7 league table, trailing behind all comparable economies, including Germany, which is currently experiencing its longest period of economic stagnation since the end of the Second World War. For a government that has repeatedly framed investment as the foundation of future prosperity, the figures are deeply uncomfortable.

Sir Keir Starmer and Chancellor Rachel Reeves have made boosting capital inflows central to Labour’s economic strategy, arguing that years of underinvestment have eroded productivity, wages and living standards. Since taking office, they have promised to cut planning red tape, streamline regulation and provide greater certainty to investors. However, the latest data suggests these efforts have yet to translate into a meaningful turnaround.

Economists warn that the implications of weak investment extend far beyond short-term growth figures. Tera Allas, chair of the advisory board at The Productivity Institute, has described low investment as the single biggest economic problem facing the country. She argues that without sustained capital spending on infrastructure, technology and skills, Britain will struggle to improve productivity or compete effectively with its peers.

The context makes the figures even more stark. Official data shows that the UK economy has either contracted or flatlined in nine of the 16 months since Labour came to power. While global conditions have been challenging, critics argue that Britain’s poor investment performance reflects deep-rooted domestic problems rather than temporary external shocks. The UK has trailed the G7 average for investment for more than two decades, suggesting that the issue transcends individual governments.

International comparisons underline the scale of the challenge. Italy, long regarded as Europe’s economic weak link, has emerged as the best-performing G7 country in Europe this year in investment terms. Under Prime Minister Giorgia Meloni, the Italian government has pursued policies aimed at stimulating growth, including tax incentives to attract wealthy expatriates and reforms to welfare that have encouraged higher labour market participation. Japan, meanwhile, has achieved the highest investment-to-GDP ratio in the G7 at 27.4 per cent, driven by sustained public spending on infrastructure and industrial capacity.

By contrast, Britain’s investment environment is increasingly seen as unpredictable and slow-moving. Ms Allas points to the country’s complex and often opaque planning system as a major deterrent to large-scale projects. She argues that prolonged approval processes and regulatory uncertainty can make investment decisions appear unattractive, even when underlying fundamentals are strong. For businesses weighing where to deploy capital, delays and the risk of policy reversals can be enough to tip the balance elsewhere.

Concerns about policy instability have been echoed by prominent investors. Jonathan Oppenheimer, the billionaire heir to the De Beers diamond empire, recently described Britain as “uninvestable”, citing slow decision-making and restrictive planning rules. Such comments, while controversial, reflect a growing frustration among parts of the business community that the UK struggles to convert ambition into delivery.

The consequences are already visible. Several high-profile companies have scaled back or abandoned major investment plans in recent months. In September alone, US pharmaceutical giant Eli Lilly halted construction of a £279 million laboratory at London Gateway. Merck scrapped proposals for a £1 billion research centre in the capital, while AstraZeneca paused plans for a £200 million research facility in Cambridge. Together, these decisions represent not just lost capital but also missed opportunities for skilled jobs, innovation and regional development.

The Productivity Institute has warned that even a substantial improvement in Britain’s investment rate would not be enough to close the gap quickly. Its analysis suggests that if the UK were to increase investment by around four percentage points of GDP, it would still take nearly a century to catch up with countries such as the United States, Germany, France and the Netherlands. This sobering assessment highlights how entrenched the problem has become.

Beyond policy and regulation, some analysts point to deeper cultural factors. Ms Allas argues that Britain has long suffered from a historical tendency towards short-termism and risk aversion, both in business and government. She suggests that too often decisions are driven by immediate pressures rather than long-term value creation, leading to underinvestment in infrastructure and future capacity. In contrast, countries with higher investment rates often benefit from stronger institutional frameworks that encourage patient capital and long-term planning.

The government, however, disputes the notion that Britain is failing to attract investment. A spokesperson said the UK is forecast to be the second-fastest-growing G7 economy in 2025 and argued that recent budget measures would help reduce inflation, paving the way for lower interest rates and cheaper borrowing costs. Ministers also point to commitments made during a recent US state visit, during which companies reportedly pledged a record £150 billion in investment into the UK.

Critics counter that headline pledges do not always translate into actual projects, particularly when faced with planning delays or shifting policy priorities. They argue that restoring credibility will require not just announcements but visible progress on the ground, including faster approvals, clearer long-term strategies and greater political stability.

As the government enters its second year in office, the investment challenge is fast becoming a defining test of its economic agenda. Without a decisive improvement, Britain risks remaining stuck in a cycle of low growth and underperformance, undermining promises to raise living standards and rebuild public services. For now, the latest figures serve as a stark reminder that reversing decades of underinvestment will require more than rhetoric, demanding sustained reform, consistency and a willingness to confront uncomfortable structural realities.