The financial system and productive investment: new survey evidence

Quarterly Bulletin 2017 Q1 article
Published on 08 February 2017

By Jumana Saleheen and Iren Levina of the Bank’s Financial Stability Directorate and Marko Melolinna and Srdan Tatomir of the Bank’s Monetary Analysis Directorate.

The Bank of England has undertaken an innovative new survey that collects data on business investment and financing decisions — the first of its kind in the United Kingdom.
 
About two thirds of UK businesses deemed that their investment levels have been appropriate in recent years, but one third felt that their investment had been too low. Businesses that regarded investment as too low cited financial and real economic barriers to investment.
 

Why do some firms underinvest?

qb2017thefinancialsystem

Source: Bank of England Finance and Investment Decisions Survey.

When making investment decisions many firms impose a fixed required rate of return, or ‘hurdle rate’, on investment. The average hurdle rate across UK businesses was 12%.

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Finance and Investment Decisions Survey questionnaire

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Data for the tables and charts

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