Britain remains at the bottom of the G7 for total investment, even as Labour promises billions in public spending over the next two years, according to data from the Organisation for Economic Co-operation and Development (OECD).
In the third quarter of 2025, total investment—combining public and private spending—stood at just 18.6% of GDP. This places the UK behind all other major economies in the group, including the United States, Germany, France, and Japan. Japan recorded the highest investment rate among G7 nations at 27%, while Germany invested around 20% despite being in a two-year recession.
The low level of investment highlights a long-running weakness in the UK economy. Over the past three decades, Britain has recorded the lowest investment rate in the G7 in 23 out of 31 years. Economists point to this as a key factor behind the country’s sluggish productivity growth and weak long-term economic performance.
Labour has made boosting investment central to its economic strategy, pledging to increase public spending on infrastructure, transport, and housebuilding. PwC economists estimate that public investment will rise by £13 billion in 2026–27, marking the largest two-year increase since the 2008 financial crisis.
However, private investment is expected to lag. Barret Kupelian, chief economist at PwC, warned that weaker business confidence and slower profit growth could prevent firms from matching government-led spending. “There will be a much stronger focus on domestic growth levers from the government, particularly public investment picking up at a record pace,” he said. “But private investment is unlikely to respond as strongly in the near term.”
The scale of the challenge is substantial. EY estimates that up to 1,000 major projects are planned by 2040, with public spending projected to reach £1.1 trillion. Yet even this may leave significant gaps. EY-Parthenon calculates that meeting Labour’s wider ambitions, including defence spending rising to 3% of GDP by 2030, would create an investment shortfall of £583 billion. If defence spending climbs to 5% of GDP by 2035, the gap could widen to £817 billion.
Mats Persson, global leader at EY-Parthenon, said overlapping demands across energy, defence, health, and transport are putting mounting pressure on public finances. “The government has made progress in unlocking capital for infrastructure, but long-term funding requirements are rising rapidly,” he said.
Economists argue that decades of underinvestment have hindered innovation and growth. Louise Haigh, former Labour transport secretary, said short-term policymaking and a five-year political cycle have failed to provide businesses with the certainty needed to commit capital. Reform UK’s deputy leader Richard Tice blamed tax changes and government uncertainty for driving investment abroad.
With private spending faltering and public funds under pressure, experts warn that bridging Britain’s investment gap will require sustained efforts to restore confidence across the business sector, beyond headline spending pledges.
