Staff are now doing the investing for business
Businesses are cutting down on investment because they can free-ride on their employees’ computers and smartphones, according to UBS.
The Swiss investment bank says that working from home, the rise of the self-employed professional and the advance in capabilities of smartphones, tablets and laptops has led to a blurring of the lines between business investment and personal consumption.
In a report on the ‘drought’ of global long term investment buy business it said that new technology and social changes mean t that some investment was not captured by official figures.
“The employee at home is using ‘office space’ that already exists and in all probability is using office equipment and technology that have been purchased for personal use. The result is a structural one-off reduction in the amount of capital in the economy, accompanied by a lower reported spend on capital in the future as companies invest less”
Similarly if a self-employed entrepreneur is using a tablet computer, in many cases it will be “consumer spending pressed into service as productivity enhancing capital”
However UBS found there was a genuine dearth of investment globally. The short-termism of public quoted companies is blamed for part of the shortfall. The bank recommended overhauling executive bonuses to make them more dependent on longer-term targets and for changes to the capital gains tax system to encourage assets to be held longer.