How the UK Could Rebound in Business Investment After COVID-19?

The COVID-19 pandemic, originating in Wuhan, China, had an unprecedented global impact comparable to World War II.

Every country faced lockdowns and safety measures to protect their population, leading to a profound economic crisis.


By November 2021, nearly all countries reported cases, with only a few exceptions. Despite remarkable vaccination efforts,

the pandemic’s human toll of over 250 million cases and 5 million deaths is a tragic reminder of its severity, with lasting societal changes in how we live, work, and interact.

Stephen Taylor Town and Country was established in 1978. It is an award-winning property company with multi-discipline property expertise in investing in residential and commercial property development. Real estate was also severely affected due to this pandemic situation. Let us discuss how the UK has recovered post-COVID-19.

Several factors have moderated the impact of the pandemic on business investment

  • While business investment declined by 10.2% in 2020, it was less severe than the 2009 financial crisis’s 15.3% drop.
  • Unlike the previous crisis, bank lending remained stable, and the economic impact was concentrated in less capital-intensive sectors.
  • Some sectors saw increased investment due to pandemic-related demand shifts. With consumer spending likely to lead the recovery, i
  • creased demand and confidence are expected to drive investment, reflected in recent surveys showing improved investment intentions.
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The key to the recovery will be financial resources and incentives offered to invest

  • The strength of the business investment recovery hinges on financing resources and incentives for firms.


  • High debt levels may hamper investment, as interest costs consume revenue, and future borrowing capacity decreases.
  • However, corporate debt relative to GDP in 2020 remained below pre-financial crisis levels. Moreover,
  • reduced expenses and government aid left the corporate sector over £100 billion in surplus cash. Like individual savings, this cash surplus holds the potential for a robust investment upturn.

Between different industries significant variations will be present

  • Post-pandemic, the impact on business investment will differ by sector. Permanent remote work may boost spending on IT, while social distancing may encourage automation investment.
  • Due to the pandemic and Brexit, fewer overseas workers might prompt labour-saving technology investment. Conversely, more remote work could affect commercial real estate investment.

New tax breaks will offer limited positive effect

The ‘super-deduction’ tax incentive announced in the March Budget aims to boost investment by making projects more profitable and encouraging early spending.

However, it has limitations, mainly affecting smaller firms less, and the planned corporate tax rate increase in April 2023 could hinder medium-term business investment.

Decisions will be made based on economic optimism and belief in increased demand

  • Recent history highlights the significance of demand in influencing investment. Slower GDP growth in the decade to 2019 led to reduced business investment.
  • While companies may hesitate to invest after years of weak growth and global economic shocks, there is optimism.
  • High household savings could fuel a consumer boom, aided by government policies, regional development efforts, and gradual interest rate increases.


  • The critical question is whether this optimism can lead to sustained business investment in a more promising future.


The UK’s business investment has lagged behind other major economies for years, but the pandemic has created conditions for a potential rebound.

However, cautiousness due to economic shocks may hinder this, and sustained higher investment depends on maintaining economic confidence, which is still being determined.

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