Business investment in Britain slowed sharply in the first quarter of this year, according to figures released on Monday.

The Office for National Statistics (ONS) announced that seasonally adjusted business investment in the first three months of 2001 was �28.8bn, 5% down on the previous quarter, and up only 2.3% year on year.

Last month, the ONS had predicted that first-quarter investment would be �30.9bn, a 9.9% annual jump.

The downward revision makes it less likely that overall quarterly economic growth figures, due to be released on Tuesday, will be any higher than the 0.4% forecast earlier.

UK government bonds rallied slightly, buoyed by the hope that weak economic growth may spur a cut in interest rates.

Ups and downs

The most robust figures were recorded in UK manufacturing industry, whose investment, at �4.5bn, was slightly up on the previous quarter.

But the much larger service sector saw the biggest slump, spending �21.1bn, down 6.2% on the fourth quarter of last year.

Boosting business investment has long been a priority of the UK Treasury, which sees spending on technology as a key measure in increasing British productivity.

But an April report from the Institute for Fiscal Studies argued that peculiarities in statistical methodology meant that government figures were consistently overestimating business investment.