What laptop sales can tell us about sluggish capital spending

Slow capital spending growth is a much debated feature of the recovery. UBS economist Paul Donovan thinks the changing way we work helps solve the puzzle

One of the striking features of the economic recovery in the UK and elsewhere is how sluggish capital spending has been - especially considering that businesses can borrow at rock-bottom interest rates.

Why is that? Well, if you are reading this on your laptop, and you use that same laptop for work, you may guess where this is going.

One possible explanation lies in the change in working practices.

"In 2000, 32% of UK businesses were employers. By 2014, 24% of UK businesses were employers. This raises the obvious question of what on Earth 76% of UK businesses were doing if they were not employing anyone - and the answer of course is that they were single person businesses where the owner was the sole person 'on payroll'.
Self-employment now accounts for 15% of the workforce in the UK."

If you are a self-employed consultant, you probably already have a laptop, have a car, have an office at home. As the boundaries between home and work blur, we are making better use of the capital we have got."

Twenty years ago, capital spending on computer equipment meant a desktop computer at least. These were not portable devices. Business investment in technology meant investment that was clearly capital spending; purchased by the company and physically located in the company. Today that is not true. A laptop or a tablet device can easily provide the basic requirements for an employee."

What this means is that investors looking for a "capex recovery" may be missing the point. The secret capex story may be that businesses make better use of non-business assets, and that part of the capex cycle ... masquerades under a 'retail sales' pseudonym."