WHILE business confidence might be rising, this is still not translating into desperately-needed investment.

The continuing weakness of business investment was highlighted in the Bank of England's latest quarterly inflation report on Wednesday.

And Strathclyde University's Fraser of Allander Institute warned last month, in its highly regarded economic commentary, of the urgent need for a rise in business investment, and progress on the export front. It declared that sustained recovery in Scotland was "by no means certain", particularly given the current mix of expansion. This comment is as pertinent to the broader UK economy.

Observing Chancellor George Osborne's evident self-satisfaction with a couple of quarters of strong growth after a dismal period, people could be forgiven for thinking the protracted weakness of UK business investment is no big deal. But it is and Mr Osborne, in spite of his developing grin, will know that it is.

The UK recovery, even in these early stages, is showing an alarming reliance on UK consumers who have spent more freely in recent quarters, even as their incomes have continued to drop in inflation-adjusted terms.

Mr Osborne, after his vision of a "Britain carried aloft by the march of the makers" failed to turn into reality, decided to resort to an old policy favourite, pulling the levers to boost the UK housing market and trying to instil some confidence that way.

From his point of view, with the 2015 General Election no doubt firmly in his sights, these measures of last resort look to be working in the short term. Excited chatter about house prices may soon once again become the staple of dinner party conversation in some parts of the UK, if it has not already done so.

However, given the experience of recent years, there is no excuse for failing to heed dangers on the economic horizon. And it does not take a pair of binoculars to see that the recent growth in UK economic output is dangerously unbalanced.

Official figures yesterday showing a 0.7% month-on-month fall in UK retail sales volumes in October, on a seasonally adjusted basis, provided a timely reminder of the perils of relying on hard-pressed consumers.

An examination of the likely causes of businesses' reluctance to invest suggests barriers to the required hike in capital expenditure are big, and difficult to shift.

It will come as no surprise that executive pay policies at the big stock market-listed companies could be at least partly to blame. The drive to link rewards to performance appears at times merely to have had the effect of inflating executive pay ever further, to levels that would have been unimaginable 20 years ago.

And the way in which executives' performance is measured appears, all too often, to dictate against investment for long-term growth. Some executives might well, given the way their lavish rewards are structured, think there is nothing to be gained and much to be lost by investing for the future.

After all, such investment might dampen performance in the short term, with the benefits flowing to shareholders several years out. It might therefore be expected to bear down on their annual bonuses and their payouts under long-term incentive plans (LTIPs), which are, in reality, actually medium-term at best given that they tend to be based on three-year periods.

Professor Brian Ashcroft, economics editor of the Fraser of Allander commentary, has highlighted the temptation, in this environment, for companies' top management to use cash piles to buy back shares, as opposed to investing for future growth.

Share buy-backs can provide a swift boost to the performance figures that dictate the bonus and LTIP pay-outs to top company executives.

However, it is not just big company executives' lack of willingness to invest, for whatever reason, which is behind the lamentable weakness of capital spending by business.

There are signs that the credit climate has been easing, but it is important to remember the lending environment has been extremely tight in recent years. So there are no doubt still many small and medium-sized businesses, and larger enterprises, that cannot secure funds for investment plans.

However, there is almost certainly something else at work here.

Many private businesses, which had control of their own destinies before the financial crisis hit and then found themselves at the mercy of, at times, dysfunctional banks, will surely have to think long and hard before borrowing again to invest.

These businesses might, for example, have breached the terms of their loans because of economic circumstances beyond their control.

Many of these firms will have worked tirelessly to get things back on an even keel, and return to a position where they are not beholden to an outside party. In a family business that has had a particularly bad experience, it might even take a generation before the mind-set of ensuring self-determination at all costs, developed in these tumultuous last few years, can be shifted back to a less risk-averse approach.