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February 25, 2010    

UK business investment sees substantial fall

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by Kay Murchie

The Office for National Statistics (ONS) has today reported a sharp fall in business investment, raising concern over the second estimate of fourth quarter GDP figures, which are due to be published tomorrow.

According to the ONS, business investment fell by 5.8% in the fourth quarter of 2009 to £27.1 billion - the steepest annual fall since records commenced in 1967.

On an annual basis, business investment fell by a record 24.1% and was much steeper than the fall of 18.5% expected by analysts.

A large business investment is an indication of overall growth and demand in the UK economy and therefore the figures have raised concerns about the fourth quarter GDP growth within the economy.

Last month, the ONS revealed the UK economy grew by 0.1% between the October and December period - meaning the UK had only just emerged from recession.

While economists had expected that the economy would experience positive growth in the fourth quarter, growth of around 0.4% was expected.

However, the figures were only the first estimate and the second estimate will be released tomorrow.

Commenting on today’s business investment data, Howard Archer, UK economist at IHS Global Insight, said: “The substantial fall in business investment in the fourth quarter of 2009 is a horrible surprise and extremely disappointing.”

He adds: “It dilutes hopes of an upward revision on Friday to UK GDP growth … and even raises the spectre that this minimal growth could be revised away.”

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