Persistence of Profits for UK Manufacturing and Service Sector Firms

Adopting methods which have been developed elsewhere in analysing the dynamics of profitability, this paper investigates the persistence of profits for a UK sample which includes, for the first time, a contingent of service sector firms. Persistence of profits is found to be marginally higher in services than in manufacturing. Industry-wide characteristics are found to be important in determining long-run profitability within manufacturing but not within services. Firm size appears to be a determinant of persistence of profit in manufacturing but not in services, suggesting that the most prevalent types of barrier to entry may differ between the two sectors.