According to a survey conducted by Deloitte, major British companies are reportedly making plans for hefty investments in 2022 for addressing the strong market demand and responding to climate change amidst growing labor shortages.
Nearly 37% of chief financial officers felt that high capital spending will remain a priority for 2022, the most since the beginning of the quarterly survey in 2009, and up by 20% at the start of 2021.
Notably, previous concerns regarding weak global growth and Brexit have reduced significantly. Instead, companies have pinpointed persistent shortages of labor as their biggest challenge ahead of the COVID-19 pandemic. Meanwhile, climate change & higher inflation, and asset price bubbles were slated to be the third and fourth biggest challenges respectively.
If the investment plans are successfully implemented, they could spell an easing of the long-standing productivity problems in Britain, which have been attributed to the country’s lower business investment rates as compared to other rich nations.
The Bank of England stated that a tight labor market had propelled wage growth above pre-pandemic levels and was one of the primary reasons for its interest rate hike last month.
Policymakers have also estimated that inflation will peak to a 30-year high, reaching around 6% in April this year, and will take more than two years to settle down to its 2% target.
The main motivation for the investment surge is to support long-term business plans, as well as the predicted demand growth in Britain, and overseas countries. Other minor factors affecting these trends are higher tax incentives and the government's agenda aimed at reducing regional inequality.
According to sources, digital technology sector is expected to witness the most investment relative to the pre-pandemic trend, followed by investments in workforce skills and building productivity. Meanwhile, real estate and physical plant and machinery segments are least likely to gather quick funds.
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