Look to the intangibles

Jonathan Haskel is a professor of economist at Imperial College, and Stian Westlake is executive director of policy and research at Nesta.

“The structure of the British capital markets has contributed to corporate goals that do not support investment and innovation”. -Michael Porter, “The Competitive Advantage of Nations” (1990)

“Deep-seated short-term attitudes… have led us to invest less than we might in technology and advanced means of production”. – Michael Heseltine, speech in Parliament (1993)

“All corporate Britain is infected by the same bias: …under-investment and lack of innovation”. – Will Hutton, The Observer (2011) “If Britain is to remain a G20 economy, it must start investing like one.” – The Economist (2013)

BRITISH businesses have always underinvested, haven’t they? Experts from Michael Porter to Michael Heseltine to Will Hutton all agree. The idea is so old and so widespread as to be received wisdom.

But is this truism really true? Over the last decade, researchers have gradually reached a surprising conclusion: when you take into account intangible investments, such as software development, product design and training, British businesses aren’t investment laggards after all.

Let’s first of all consider the case against UK plc. Exhibit…Continue reading

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