These numbers make it likely that capital spending will fall short of the Office for Budget Responsibility (OBR)'s forecast of 6 per cent growth this year: to achieve this, investment will have to accelerate in the second half of this year despite increased concerns about slower world trade growth.
Instead, companies still want to build up financial assets: the Office for National Statistics (ONS) reports that their net lending (the gap between retained profits and physical investment) rose to £7.2bn in Q2 or 1.5 per cent of GDP, compared with 1.1 per cent a year ago.
This continues a long-term trend: corporate net lending has been positive since 2002 and the share of business investment in GDP has trended downwards; in Q2 it was 9.9 per cent compared with over 13 per cent in the late 1990s. These numbers are consistent with fears of secular stagnation - the danger that a lack of profitable investment opportunities will condemn western economies to meagre growth.
But Mark Gregory, chief economist at EY, expects capital to recover thanks to falling corporation tax, strong balance sheets and low borrowing costs. By 2019, he says, investment as a share of GDP will be "at the highest level we've seen for over three decades".
