Restructuring and Productivity Growth in UK Manufacturing

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 relative importance of ‘internal ’ restructuring (such as new technology and organisational change) and ‘external ’ restructuring (the process by which less efficient establishments exit and more efficient establishments enter and increase market share). We find that (a) ‘external restructuring ’ accounts for 50 % of labour productivity growth and 90 % of TFP growth over the period; (b) much of the external restructuring effect comes from multiestablishment firms closing down poorly-performing plants and opening high-performing new ones, and (c) external competition is an important determinant of internal restructuring.