The businessman's newspaper The Telegraph writes :
"The key hindrance to growth is not absent credit but simply that businesses are reluctant to invest... UK corporates have cash sitting on their balance sheets of £754 billion, or around a half of annual GDP...These sums have doubled over the course of the past decade, with much of the growth having taken place during the financial crisis of the past four-and-a-half years...Companies would rather save the money than invest it. Capital spending remains some 17.5pc below its pre-crisis peak...The challenge is rather how to get them to spend their money..."
As the Socialist Standard explained:
"...capital accumulation is what drives the capitalist economy...If businesses judge there is no prospect of making a profit from expanding production they won’t do it. They will simply hoard their extra profits and build up cash mountains."
Since capitalism runs on profits and responds to changes in the rate of profit, rather than to consumer demand, as the popular defence of capitalism claims, recovery will only come when the rate of profit is restored. Business investment falls either because profits are down or because they are not prepared to reinvest all of them as they don’t see themselves making a profit from doing so.
Governments cannot do anything to increase capital accumulation. That depends on the amount of profits that capitalist firms expect to make, which in turn depends on market conditions, which governments can’t control.
Consumer demand will never recover of its own accord. How could it? Workers can’t simply spontaneously increase their income. It will only revive when production and employment do. And that depends on the prospects of profitable production reviving. We cannot shop our way out of a crisis!
There is a the theory that, as taxes on profits are being reduced, capitalist firms will invest more. But it is by no means as simple as that. You can bring a horse to water but you can’t make it drink!
Then there is the idea that business investment will resume just because government spending is reduced which is simply an ideological assumption.