investment

Importance of Bank Lending to UK Economy

Readers Question: What is the importance of bank lending to the UK economy? Bank lending plays an important role in influencing levels of consumer spending, investment and economic growth. When bank lending reduced at the start of the credit crunch in 2008 – this decline in bank lending was a significant factor in causing the 2008 recession. This graph shows that lending to UK households and business was growing rapidly during the period…

Gross Fixed Capital Formation

Gross Fixed Capital Formation

Gross fixed capital formation is essentially net investment. It is a component of the Expenditure method of calculating GDP. To be more precise Gross fixed capital formation measures the net increase in fixed capital. Gross fixed capital formation includes spending on land improvements (fences, ditches, drains, and so on); plant, machinery, and equipment purchases; the construction of roads, railways, private residential dwellings, and commercial and industrial buildings. Disposal of fixed assets is taken away from the total. Gross fixed capital formation…

Investment in UK – Business and Public Sector

Investment in UK – Business and Public Sector

Total UK Business investment, slow recovery from 2009. (seasonally adjusted, Current Prices) Source: ONS Q3 2012 An unconvincing recovery in business investment. But still, business investment increased by £1.3 billion (4.5 per cent) when compared with the third quarter of 2011. The outlook for business investment remains muted: Despite low interest rates, banks are maintaining strict lending criteria and rationing finance. Many small and medium sized firms still state finance is…

Impact of a Fall in Public Sector Investment

Impact of a Fall in Public Sector Investment

Source ONS | NTV A possible unit 4 A Level question this summer could be: Discuss the Impact of a fall in public sector investment on the UK economy? The graph shows a fall in public sector investment from 3.5% of GDP in 2008  to 1.5% in 2011. This means cuts of approximately £30bn a year. It means the government is spending less on capital investment projects such as new schools, new roads and other infrastructure investment. That is quite a significant fall….