Restructuring and Productivity Growth in UK Manufacturing

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We analyse productivity growth in UK manufacturing 1980-92 using the newly available ARD panel of establishments drawn from the Census of Production. We examine the contribution to productivity growth of ‘internal’ restructuring (such as new technology and organisational change among survivors) and ‘external’ restructuring (exit, entry and market share change). We find that (a) ‘external restructuring’ accounts for 50% of establishment labour productivity growth and 80–90% of establishment TFP growth; (b) much of the external restructuring effect comes from multi-establishment firms closing down poorly-performing plants and opening high-performing new ones, and (c) external competition is an important determinant of internal restructuring.