But the rest is down to business investment which has risen far less than in the 1981-1986 upswing as the chart shows

But the rest is down to business investment, which has risen far less than in the 1981-1986 upswing, as the chart shows.Most of the attention about the issue of missing investment has focused on manufacturing, but the Bank's breakdown of the data immediately turns up two facts that challenge the received wisdom. About one-third of the relative weakness is due to low investment by government, but the private sector has accounted for two-thirds. A drop in residential construction since the property price collapse explains a further one third of this. It notes that since the recovery began, starting in early 1992, total investment has declined as a share of GDP. For another, the Bank had hoped that the introduction of inflation targeting after the September 1992 exchange rate mechanism crisis would have started to improve the record of macroeconomic instability. Ever since that point, in fact, the economy has been expanding much more steadily than was the norm in previous recoveries.In the Bank's Quarterly Bulletin, published today, one of its economists, Simon Whitaker, takes a closer look at the recent investment performance. For one thing, if there is too little investment in new capacity in some sense, the economy will run into the inflationary buffers sooner rather than later.

One of the perennial concerns about the performance of the British economy is the lack of investment. This has been particularly acute during the present recovery because the rise in investment spending during the upswing has been far smaller than it was during previous cycles. The Pre-Budget Report published by the Treasury last November picked out the problem. It said: "Our record on investment has been poor by international standards." And it added one possible explanation: "The UK's track record of macro-economic instability has discouraged long-term planning and investment." This is a possibility that has concerned the Bank of England for some time. The Engineering Employers' Federation also recently expressed concern about higher settlements..

Most significant, underlying average earnings growth remained unchanged at 4.75 per cent.The ONS pointed out that earnings were rising at an annual rate of 9.6 per cent in financial services, driven by a surge in City bonuses.Incomes Data Services, which monitors pay deals, recently reported a surge in the number of settlements above 4 per cent. It said the labour market continued to be "healthy", with the trend fall in unemployment in the range 20,000-40,000 a month.Even so, yesterday's batch of figures contained other indications that the recovery in the jobs market is slowing. As the Prime Minister launched the advertising campaign for the Government's ``New Deal'', the number of jobless claimants actually rose in the North- east, Scotland and Northern Ireland. "There are signs that the rate of fall might be starting to level off," said Andrew Smith, Employment Minister, even as he welcomed the news of a further decline in the headline jobless figure.The Office for National Statistics said the lower-than-expected drop last month could have been caused by claims not being processed over Christmas. The jobless rate stayed unchanged at 5 per cent of the workforce, the lowest for 18 years.

The Government yesterday admitted that the rate of fall in unemployment might be starting to "level off". The warning came as new figures showed the number of people claiming unemployment benefit fell for the 23rd month running in January, but the decline of 12,300 to 1,398,500 was far less than expected. It has major implications for London, the UK and for the rest of Europe." But he added that the Government would have to commit funding early in the construction to encourage private sector funds into the project.Eurorail would not start building the link or seek to raise private finance until Eurostar was firmly in the black. Eurorail asked for pounds 2.1bn in subsidies at February, 1996 prices, but its Eurostar traffic forecasts were much more conservative.Mr Clarke said: "This project is too important to fail at this stage. But he indicated it would be unlikely to be complete before 2007 - compared with the planned opening date of 2003.The future of the rail link was thrown into disarray two weeks ago when London & Continental Railways said it could not complete the project without an extra pounds 1.2bn in subsidies.LCR's winning bid in 1996 involved pounds 1.4bn in subsidies and assumed that the Eurostar service would be carrying 10 million passengers by this year. The company has been one of the most consistent performers in the UK IT sector, with a steady record of rising profits..