Russell Black ESCoE Economic Measurement Webinar 16 January 2025

Aggregate productivity decompositions using structural business survey data: Evidence from the UK
UK trend productivity growth fell sharply in 2008 in the non-financial business economy. If the UK economy had kept its 2% trend productivity growth since 2008, this would have been worth hundreds of billions of pounds in higher wages and increased tax revenue. We investigate the fall in productivity growth using data from the Annual Business Survey. We decompose the fall in productivity growth into the less efficient reallocation of workers across businesses, and to the lower productivity growth within businesses.

Before 2008, reallocation of workers to high productivity businesses from low productivity businesses was an important driver of overall productivity growth. Growth due to reallocation was much weaker in the 2010s – this lower rate of dynamism is a very substantial driver of the overall fall in productivity growth of non-financial businesses.

We show how this estimate varies for different methods of calculating the decomposition, and different methods choices when using the raw data. We derive new weights for the Annual Business Survey respondents, to represent the business population longitudinally. One contribution of this research is to demonstrate the calculation of a decomposition over time, using data from a survey data source where the survey sample changes from year to year, as this is a task that has applications generally.