The second cyclical factor that has had a major impact on our exports and business investment is the protracted recovery of the US economy—the slowest in the postwar period.10 When oil and other commodity prices rose in the years before the 2014 oil price shock, so did our dollar, making our non-commodity exports to the United States less competitive and reinforcing the ongoing shift from manufacturing to services.
As I mentioned earlier, this is likely reducing the level of investment. Now, let’s look at the structural factors that affected business investment during this period. I’ll focus on two: demographics and productivity growth. Population aging under way across most advanced economies has led to a marked slowdown in labour force growth, and this has been a strong headwind to investment.