Job Creation, Job Destruction and the Contribution of Small Businesses: Evidence for UK Manufacturing

Abstract

We use the ARD micro level data set for UK manufacturing to document job creation and job destruction (JC&D). Due to data limitations, previous UK studies were unable to use entry and exit in calculations of JC&D and/or were are at the firm rather than establishment/plant level and/or used data that understate the number of small businesses in the economy. Our data can overcome these problems being based on plant and establishment-level data from the UK Census of Production. We compute JC&D levels and rates and the contribution of small businesses for UK manufacturing between 1980 and 1991 and compare our findings with previous UK studies and other countries. We find: a) establishment (plant) job creation and destruction rates of 10.0% and 13.5% (11.2% and 14.7%) respectively, higher than other studies; b) large establishments (plants) are responsible for about 60% (55%) of job destruction; and c) small establishments (plants) are responsible for between 50% and 68% (57% and 70%) of job creation, depending on calculation method.

Keywords: Small firms, job creation and destruction.

JEL Classification: H32, J23, J63, J68, L52, L60