Presentation to ISBE 2019 by Neha Prashar

1. Aston University
Birmingham
B4 7ET
E: n.prashar14@aston.ac.uk,
mark.hart@aston.ac.uk
Business Dynamism, Job
Reallocation Rates and the UK
Productivity Puzzle
(1998-2018)
Neha Prashar and Mark Hart

2. Main Research Objective
• Analyse how the business stock in the private
sector in the UK has changed over 1998-2018 and
the relationship to recent productivity stagnation
(the productivity puzzle)
• Davis et al (2008) noted that higher turbulence and
reallocation of jobs in the economy is productivity
enhancing and leads to better living standards.
• Particular focus on job creation and destruction
pre-recession (1998-2008) and post-recession
(2009-2018)

3. Data and Methodology
• Data used is the ‘Business Structure Database’
(BSD) complied by the ONS sourced mainly from
HMRC.
• Job Creation = Total employment change due to
new firms entering the market or firms expanding
• Job Destruction = Total employment change due
to firms exiting the market or firms contracting
• Job Reallocation Rate = Job Creation + Job
Destruction
• Net Employment = Job Creation – Job Destruction

4. 4.6 5.1
4.1
8.8
9.6
8.0
6.2
7.4
4.8
6.2
6.4
6.1
0.0
5.0
10.0
15.0
20.0
25.0
30.0
1998-2018 1998-2008 2009-2018
Rate(%)
birth (entries) expansion exits contraction
JC
JC
JC
JD
JD
JD
Job Creation and Destruction in the UK
(1998-2018)
• Less dynamism
post-recession.
• Considerable
drop in exits
(11% in 1998 to
4% in 2018)
• Drop in
dynamism is
consistent with
stagnant
productivity.

5. Job Creation and Destruction by Region
(1998-2018)
-20.0
-15.0
-10.0
-5.0
0.0
5.0
10.0
15.0
20.0
25.0
30.0
S E LO NW NE W A S W W M S C E A Y H NI E M
RATE(%)
UK REGIONS
net employment gains losses reallocations • East Midlands shows
the lowest level of
business dynamism.
• The East of England
and the South West
experienced the
highest overall net
employment levels
• The South East,
London, North East
and North West
regions showed the
highest level of
turbulence in the job
market, where over
27% of jobs were
destroyed or created.
• Northern Ireland saw
the smallest drop of
0.7 percentage
points, while the
South East saw a
drop of 7.1
percentage points.

6. Job Creation and Destruction by Sector
(1998-2018)
-20.0
-10.0
0.0
10.0
20.0
30.0
40.0
ManufacturingElectricityConstructionWholesale and
Retail
Hotels and
Restaurants
TransportFinancialReal EstateOther activities
RATE(%)
SECTOR
Net Emp. Change Job Gains Job Losses Job Reallocations
• The highest level of
business dynamism is in
the hotel and restaurant
service industry, which is
to be expected as many
of these jobs may be
part-time, zero-hour
contract or seasonal
type employment.
• There is a very sharp
drop in job reallocation
rates in the financial
sector, where rates fell
by 11.3 percentage
points post-recession
and manufacturing
sector which saw a 5.8
drop in percentage
points.
• Overall, business
dynamism across all
sectors dropped post-
recession.

7. Job Creation and Destruction by Firm Size
(1998-2018)
-30.0
-20.0
-10.0
0.0
10.0
20.0
30.0
40.0
50.0
60.0
1 employee 2 employees 3 employees 4 employees 5 to 9
employees
10 to 24
employees
25 to 49
employees
50 to 249
employees
250+
employees
Rate(%)
Net Emp. Change Job Gains Job Losses Job Reallocations
• Firms with a single
employee experience
a higher level of job
turbulence when
compared with larger
firms.
• There was a slight
decline post-recession
in entry and exit rates
across all of the
different sized firms
but trends remained
the same.
• Firms with 5 to 9
employees and 10 to
24 employees saw the
least change post-
recession – a drop of
around 2 percentage
points in job
reallocation rates.

8. Conclusion
• Post-recession saw a decline in JR rates in the UK. They have not yet
returned to pre-recession levels and this is holds true at varying levels
when looking at different regions, sectors and size.
• This goes hand-in-hand with the slowdown in productivity. Less
dynamism means less productivity-enhancing turbulence in the job
market.
• Businesses are hiring and firing all the time but it is the ‘normality’ of the
scale of those actions which often goes unreported – in both good times
and bad.
• Grasping the level of job churn in underlying base assumptions on the
future performance of the UK economy is fundamental for policy
makers, especially with the recent political climate.

9. Thank you!
Questions/Comments?
Dr Neha Prashar (n.prashar14@aston.ac.uk)
Professor Mark Hart (mark.hart@aston.ac.uk)
The data used here is from the Jobs and Turnover version of the Longitudinal Business Structure Database which can be
accessed through the Secure Lab. The use of these data does not imply the endorsement of the data owner or the UK
Data Service at the UK Data Archive in relation to the interpretation or analysis of the data. This work uses research
datasets which may not exactly reproduce National Statistics aggregates