Productivity Puzzles, Long Tails and Productivity Heroes: developing a new focus for small business policy in the UK

ERC Insight paper

Associated Themes
  • Business Growth
  • Productivity and performance

Previous research by the ERC showed that there was a very poor correlation between jobs growth, increases in revenues and productivity gains in the UK business population. Most firms struggled to significantly increase turnover, jobs and productivity simultaneously, and crucially the analysis showed that the only ‘space’ where the growth in turnover, jobs and productivity are all positive is sparsely populated, accounting for less than one in ten of the surviving panel of firms.  This has led to the identification of a small group of firms in the UK that we have termed ‘Productivity Heroes’ which we define as firms growing both their revenues and headcount but their revenues at a faster rate – hence also increasing their productivity. These 36,298 businesses (8% of all firms increasing their productivity) collectively contributed more than £268 billion to the UK economy in 2022 – a contribution that grew by more than £177 billion in the period 2021-22.