A tale of two cycles: closure, downsizing and productivity growth in UK manufacturing, 1973-89

This article uses the ARD, the new longitudinal database of the Census of Production, to analyse productivity at the establishment level in the two cycles of I973-9 and 1979-89. Contrary to a commonly held view, closures did not play a major role in accounting for productivity growth in 1979-89. Establishments which shut had lower productivity than survivors but the exits were replaced by entrants whose productivity was also lower. Hence most of productivity growth was due to growth within survivors. Most productivity growth occurred in establishments which reduced employment. But despite an overall fall of a quarter in employment, 16 per cent of productivity growth occurred in establishments which expanded employment. The main difference between 1973-9 and 1979-89 was in the productivity growth rate amongst survivors. In 1973-9, it was negative overall and over half of employment in I973 was in establishments where productivity subsequently fell.