UK economy in growth 'doom loop' as business investment slumps versus G7 peers, think tank says

Decades of underinvestment by the government and businesses have left Britain's economy in a growth "doom loop," according to the U.K.'s Institute for Public Policy Research.

New research from center-left think tank estimates that the U.K. has contributed $500 billion ($638 billion) less to business investments than did other comparable wealthy countries.

The half-a-trillion-pound spending shortfall ranks the U.K. behind all other G-7 countries, and puts it 27th out of the 30 OECD nations, with only Poland, Luxembourg and Greece investing less.

The IPPR said that U.K. underinvestment in infrastructure, research and development, skills and training had spanned several decades and successive governments, dating back to 2005.

In order to stay at the G7 average from that time, private sector investment since then would have to have been $354 billion higher in real teams, while public sector investment should have been $206 billion more.

"The U.K. is in an investment and growth doom loop. Chronic under-investment, public and private, is delivering stagnating growth and a struggling economy," Luke Murphy, associate director for energy and climate at IPPR, said.

A separate study released Tuesday by the IMD ranked the U.K. behind other major economies for its global competitiveness, particularly in economic performance and business efficiency.

A spokesperson for the U.K. government did not immediately respond to a CNBC request for comment on the findings.

However, the right-leaning Conservative Party — in power for 13 years — has said that increased business investment, including a package of tax reliefs announced in the spring budget and additional spending on technology and green energies, will help boost the economy.

The U.K. is on course to be the worst-performing of all G7 economies this year, according to the International Monetary Fund's latest forecast, which suggests Britain's GDP will shrink 0.3% overall.

It comes as higher living and lending costs continue to dampen consumer spending, while Brexit uncertainty weighs on business sentiment.

The IPPR said further public investment could bolster business confidence and cause the private sector to "crowd in" with additional spending, likening the behavior to the Biden administration's Inflation Reduction Act.

"If the economy is the engine of a country, investment is its fuel. But the UK's tank is running on empty and it's harming economic growth, driving inequality, and slowing progress towards net zero and energy security," George Dibb, associate director for economy at IPPR, said.

The opposition Labour Party — currently around 16 points ahead of the Tories in the polls — last week said it would pare back its flagship green industries spending pledge because of still rising interest rates.