1 in 2 UK businesses set to increase capital investment over the next year

UK businesses intend to increase capital investment in the coming year, according to new research from Lloyds.

Capital investment trends over the next 12 months
Of all business leaders surveyed, 1 in 2 (47%) expect to increase their level of capital investment in the coming year, one third (34%) intend to maintain the same level and only 7% anticipate a decrease.

Three quarters (77%) positioned capital investment as essential for future growth and resilience, and the same proportion said they had access to the financial products needed to support their capital investment needs.

When asked which factors would make them more likely to increase capital investment, business leaders cited stronger customer demand (37%), improved cashflow (36%), lower energy costs (29%) and stable economic conditions (27%).

Intention to increase capital investment was highest among businesses in the East Midlands (53%), Scotland, London and the North West (52% each), as well as among businesses that trade internationally (65%). Medium-sized businesses (those with 50-249 employees) were notably more likely to plan to increase capital investment than smaller firms (fewer than 50 employees), with the strongest appetite among those employing 100-249 people (65%).

Capital investment trends over the past 12 months
More broadly, almost half of businesses (46%) said their overall appetite to invest capital expenditure had increased compared with the past 12 months, while 40% said it had stayed about the same and 12% said it had decreased.

While a third (34%) of businesses secured new financing for capital investment, only 60% had used it. Technology and digital infrastructure attracted the most capital investment (41%), followed by equipment and machinery (36%), research and development (27%), sustainability measures (23%) and labour-saving automation (22%).

Weaker business conditions (14%), operating cost pressures (10%), cash flow and liquidity constraints (10%) and supply chain disruption (9%) were the main barriers to capital expenditure investment.

Amanda Murphy, CEO for Lloyds Business and Commercial Banking, said:
“Despite heightened geopolitical uncertainty, it’s encouraging to see businesses planning to increase their capital investment. Firms need the right conditions to invest – whether that’s investing in AI, new technology, upgrading equipment or expanding capacity. It’s interesting that, while many businesses have already secured funding for investment, a significant proportion have yet to deploy it.

“Investment drives productivity, competitiveness, and long-term growth. Ensuring businesses have the confidence, funding and support to move forward will be critical. By helping firms unlock investment, we can support growth, boost productivity and strengthen the UK’s economic outlook.”