UK investment booming in summer


UK investment booming in summer
British business investment rose sharply in the third quarter of 2006, new government figures show.

Data from the Office of National Statistics (ONS) reveals that the overall investment rose by 3.1 per cent on second-quarter figures, noting a 16.1 per cent increase in large-scale expenditure in the engineering and vehicles industries as among the leading boom sectors.

Overall the manufacturing sector struggled, however, seeing its investment levels fall year-on-year by 5.5 per cent. Construction and other production rose by 23 per cent, the ONS said.

Despite the ONS stating that the overall year-on-year business investment increase was 6.9 per cent, Howard Archer of research firm Global Insight said the news was not good for Britain's manufacturers.

"The rebound in manufacturing capital expenditure was somewhat disappointing after it had fallen markedly in the first half of the year. This suggests that manufacturers' capital expenditure is still being limited by squeezed margins," he explained.

Mr Archer suggested that the investment environment continued to look positive, however, citing "far from punitive" interest rates, "healthy" capital returns and "robust" corporate balance sheets as signalling good omens for the future of the economy.

"Meanwhile, the buoyancy of investment in the third quarter increases the likelihood that GDP growth in the third quarter will be confirmed at 0.7 per cent quarter-on-quarter, despite industrial production growth being softer than originally estimated," he concluded.

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