The UK has had the lowest level of private investment in fixed capital as a share of GDP in the G7 for over two decades. This low level of investment has contributed to the rapid downfall of the UK's manufacturing sector, which has declined by more than any other G7 nation.
Britain's corporate tax system is exceptionally hostile to capital investment. The UK is ranked 33rd in the OECD on the Tax Foundation's Capital Cost Recovery index.
The UK's system of capital allowances fails to account for inflation and a real return on capital, as a result businesses cannot fully deduct the costs of investments in equipment as they can with other day-to-day expenditures such as wages.
The capital stock per worker in manufacturing is more than twice as high as it is in other areas of the economy. The UK's corporate tax treatment of investment in fixed capital is in effect a Factory Tax, holding back growth in parts of the country that are relatively more dependent on manufacturing, such as the North and Midlands.