Measurement problems may explain some UK investment weakness: BoE’s Haskel

May 16, 2019

LONDON (Reuters) – Difficulty measuring firms’ spending on intangible assets such as brands and in-house software may be behind some of the weakness in official measures of business investment, a senior Bank of England official said on Thursday.

Jonathan Haskel, an external member of the BoE’s Monetary Policy Committee, said business investment had been weak between 2010 and 2016, before Brexit uncertainty offered a more immediate reason for an investment slowdown.

“For the aggregate economy, intangibles appear to be part of the story,” he said in a lecture at the University of York.

This mismeasurement – as well as the different ways intangible assets are financed compared with physical assets – would have implications for monetary and regulatory policy once they were fully understood, he said.

However, Haskel did not address the immediate outlook for Britain’s economy or the path of interest rates in his speech.

Recent research now pointed to a correlation between the extent to which businesses relied on intangible assets, and the degree to which there had been hard-to-explain falls in investment over the past 20 years, Haskel said.

Utilities and transport companies – which rely heavily on physical assets like power stations, trucks and warehouses – showed little shortfall.

But professional services and scientific research organizations, whose key assets are business processes and patents, showed an apparent fall in investment relative to standard metrics.

However, some key sectors such as financial services did not fit this pattern well and had also exerted a big drag on British productivity in recent years, Haskel added.

(Reporting by David Milliken; Editing by Frances Kerry)

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