Is your money
being put to work?

A report card for how companies use their money.

PRICI — short for the Price Restraint and Investment Compliance Index — looks at whether a company is putting money back into its future, by investing and paying staff fairly, or mainly using it to reward shareholders in the short term, sometimes while raising prices faster than competitors.

It is built from figures companies already publish in their annual accounts, so anyone can check it.

Often they do — but not always, and not always enough.

Companies face strong pressure to deliver short-term returns to shareholders. Sometimes the quickest way to do that is to pay out more and invest less, even when the company could afford to do both. When many firms make the same choice, the whole economy can end up with too little investment and slow wage growth.

PRICI makes that pattern visible, so it can be discussed and, if policymakers choose, addressed.

Normal measures show how much money a company makes. PRICI shows what it does with it.

Figures such as profit margins or return on equity tell you whether a business is profitable. They do not tell you whether the profits are being reinvested in equipment, research and people, or mostly paid out. Two companies can look similar on profit and very different on PRICI.

Three things, each compared with similar companies.

• Prices: is the company raising prices faster than others in its sector?
• Payouts: how much of its sustainable profit is it paying to shareholders through dividends and buybacks?
• Investment: how much is it verifiably investing in equipment, research and development, and pay for typical staff?

These combine into a single score. High prices and high payouts push the score up; strong investment brings it down. The full formula is explained on The Solution.

Lower is better.

A low score means the company is balancing payouts with investment and fair pricing. A high score means it is paying out heavily compared with what it reinvests. Under the proposal, firms well into the top band could face a surcharge on excess payouts. The exact thresholds are proposals that would be tested and adjusted.

Here is a simple, made-up illustration.

Imagine a company with £100 million available after running costs. It could use it in two ways:

On standard measures, Option 2 might look better for shareholders in the short term. PRICI shows it is investing less in the company’s future.

Because what makes sense for one company is not always what is best for the economy.

A chief executive who invests heavily may see the share price lag behind competitors who cut investment to pay out more. When many firms face the same pressure, the result can be lower investment across the board. PRICI makes the combined effect of these individual choices easier to see.

It is connected — and it may be part of the explanation.

Productivity means how much is produced per hour worked, and it is the main long-run driver of wages. In the UK it has grown much more slowly since 2008 than before. There are many possible reasons.

One of them, we suggest, is how money is used: large sums have gone into share buybacks and financial assets while investment and wage growth stayed weak. PRICI is designed to measure that part of the picture.

If many firms score high for a long time, we would expect weaker investment and wage growth across the economy.

Since 2008, many advanced economies have seen slow growth and weak real wages alongside healthy corporate profits and shareholder returns. PRICI does not claim to explain all of that, but it can show whether the money exists and how much of it is being reinvested.

• Governments designing tax, industrial or economic policy
• Central banks trying to understand why stimulus has not led to more investment
• Pension funds and investors looking for companies building long-term value
• Workers and unions wanting clear data in pay discussions
• Businesses comparing their own choices with others in their sector

It could help tell apart two very different problems.

When growth is weak, governments usually cut interest rates or offer tax breaks, hoping companies will invest more. That works if firms are short of money. But if PRICI shows they already have the money and are choosing to pay it out instead, cheaper borrowing may not help much. Changing the incentives around how money is used may work better.

PRICI covers companies. A companion tool, PRICI-P, looks at public spending.

The same question applies to government: how much of each pound actually reaches doctors, teachers and infrastructure, and how much is absorbed by administration, consultants and process along the way? PRICI-P (P for public) is designed to measure that. Together, the two tools show where money is — and is not — being put to good use across the economy.

Learn more in the framework overview and the FAQ by Policymakers.

PRICI is first and foremost a measurement. What to do with it is a separate decision.

Some might use the scores to design tax rules that reward investment over payouts. Others might use them simply to check whether existing policies are working. Either way, the aim is better information, so decisions are not made blind.

Yes, and PRICI does not question that.

Shareholders put their money at risk and should be rewarded. PRICI asks where the reward comes from: from growth the business has invested in, or from money that could have been building the business. A company can pay generous returns and still score well, as long as it is also investing.

Over the long run, companies that keep investing tend to be the ones that keep creating value.

A company that cuts investment to pay out more can weaken its own future. Pension funds invest for decades, so they have good reason to want to know which companies are building for the long term. PRICI gives them that information.

Those tools do different jobs. PRICI is designed to complement tax policy, not replace it.

A wealth tax changes who owns assets. A higher corporate tax raises more revenue. Neither directly changes whether a company chooses buybacks over research, or dividends over pay rises.

PRICI is more targeted. It would only affect firms paying out well above their peers without investing, and even then only on the excess. However you feel about the overall level of tax, the money already in the economy could be put to better use — and that is the question PRICI addresses.

No. It is about helping markets work better.

Markets depend on good information. There is detailed data on financial returns, but very little on how effectively companies use their capital. PRICI aims to fill that gap. Whatever your view on the role of government, better measurement tends to lead to better decisions.

That is fine. Not every company has something worth investing in at every moment.

PRICI compares firms with their peers and looks at patterns over several years, so a single company returning spare cash is not a concern. It would matter if scores stayed high across whole sectors or the whole economy for many years, because that would suggest a wider problem rather than a lack of opportunities.

The data already exists. The main task is setting up trusted, independent oversight.

Companies already publish the figures PRICI needs, so no new reporting would be required. What is needed is an independent body to set and maintain the method — similar to the way the IFRS Foundation sets international accounting rules — so that it stays consistent and credible over time. Before any of that, we propose testing the approach against past data.

The scores would be useful straight away as information. Wider effects would take longer.

As soon as scores are calculated, they would show how money is currently being used. Over time, they would also show whether policies aimed at boosting investment actually do so.

Testing the approach, and helping more people understand the question it asks.

We are proposing a back-test against 25–30 past stimulus events to see whether the approach holds up. Alongside that, we want to shift the conversation from “we need more growth” to “is the money already in the system being put to work?”