The lazy consensus of the British commentariat states that low UK growth is simply a product of neglect. Point a finger at underfunded infrastructure, stare mournfully at the G7 capital investment tables, and decry a chronic lack of state planning. It is a comforting narrative. It implies that if politicians would only sign off on enough multi-billion-pound rail links and shovel public capital into regional clusters, Britain’s productivity engine would suddenly roar back to life.
It is also entirely wrong. Meanwhile, you can read related stories here: Stop Pretending Western Mines Will Break Beijing Control Over Minerals.
The problem with the neglect thesis is not that its data points are false. Britain does invest less than its peers. Public infrastructure projects are notoriously sluggish. But diagnosing a structural illness as mere absenteeism is a catastrophic category error. The UK does not suffer from a lack of capital because successive governments forgot to look at the ledger. It suffers from a systemic inability to allocate risk, suffocating corporate dynamism beneath layers of defensive compliance, and a national addiction to low-margin business models.
Treating low growth as a consequence of neglect suggests that the cure is more state-directed spending into a broken plumbing system. Pouring water into a bucket riddled with structural holes does not fix the bucket. It just creates a more expensive puddle. To explore the bigger picture, we recommend the excellent article by Bloomberg.
The Capital Fallacy
Let us dismantle the core dogma of the investment apologists. The argument runs that Britain has a multi-trillion-pound capital gap compared to the US or France, and that this explains why output per hour worked has flatlined since the global financial crisis.
I have watched corporate boards deliberate on capital expenditure for two decades. The constraint has never been a lack of available liquidity or dry powder. British private balance sheets hold billions in cash reserves. The real constraint is a deep-seated terror of deployment. When you tax enterprise at punitive margins, penalize failure through unforgiving insolvency laws, and wrap every regional expansion in environmental and municipal red tape, capital does not flow. It hides.
Look at the composition of British corporate spending. Our firms over-allocate into low-risk, short-payback assets like commercial real estate while starving high-risk, high-intellectual-property ventures of Series B and C rounds. Blaming this on "neglect" lets corporate leadership off the hook. It assumes British CEOs are helpless orphans waiting for a Whitehall handout to tell them how to buy a server rack or upgrade a factory floor.
The truth is starker: British management teams are structurally incentivized to preserve capital rather than compound it. Until corporate governance rewards bold operational risk over defensive dividend preservation, no amount of public infrastructure spending will move the dial on productivity.
The Zombie Firm Epidemic
Another favorite delusion of the mainstream analysis is that Britain’s low growth can be solved by targeted industrial strategies and cluster support. Ministers love a ribbon-cutting ceremony for a new tech incubator or a regional green energy hub.
These initiatives ignore the elephant in the room: the UK economy is infested with zombie firms.
Since the 2008 crash, cheap credit, lenient creditor protection, and state-backed pandemic lifelines conspired to keep unviable companies on life support. In a ruthlessly efficient market, dead wood is cleared so capital and labor can migrate to high-yield frontiers. In the UK, we pride ourselves on keeping failing business models shuffling along. When capital is trapped servicing the debt of low-productivity operators, hyper-growth startups cannot hire engineers, and productive firms cannot poach skilled labor.
This is not neglect. This is active, deliberate mollycoddling. We have chosen social and corporate preservation over creative destruction. You cannot simultaneously insulate an economy from failure and expect it to generate frontier-level growth.
What Actually Fixes Growth
If we drop the comforting fiction of neglect, the remedy requires dismantling the very structures we treat as sacred.
First, we must stop trying to pick winners through centralized industrial policy. Bureaucrats sitting in Whitehall cannot engineer a semiconductor breakthrough or dictate regional tech dominance. Instead, dismantle the planning constraints that make building anything in Britain an exercise in generational patience. When a regional manufacturing plant takes seven years to secure grid connection permits, capital flees to Texas or Frankfurt. That is not neglect; that is regulatory self-harm.
Second, reform corporate taxation to aggressively reward capital intensity and intellectual property creation while letting unproductive service models die. We tax productivity while shielding stagnant property and legacy assets. Flip the incentive structure. Make holding cash more expensive than investing it in hard automation.
Finally, we need to talk about management culture. Britain’s productivity gap is fundamentally a management quality gap. Too many British firms are run by administrators rather than operators—executives whose primary skill is navigating regulatory compliance rather than engineering process innovation or scaling global supply chains.
The slowdown is not an oversight. It is the logical output of an economic consensus that values stability over velocity, comfort over competition, and state-managed stagnation over raw, unfiltered market reality. Until we are honest about that trade-off, every policy paper on growth will remain nothing more than expensive fiction.
