Firm investments in skills and capital in the UK services sector
Investments in both human and physical capital are key drivers of economic growth
and productivity gains. The United Kingdom has had a turbulent recent history, being
strongly affected by the Global Financial Crisis of 2008 and more recently voting
to leave the European Union, its largest trading partner. We use firm-level survey
data for the UK services sector to show that firms were less likely to increase expenditure
on worker training in the periods following each event. In the period following the
EU Referendum, firms were 9% less likely to increase expenditure on worker training
relative to the period before the referendum. The effects were most severe for larger
firms and for those located in London and the South East. The impacts also varied
across industries, with firms in real estate, professional, scientific and technical
activities among those most negatively affected, while administrative activities and
accommodation services were least negatively affected. We see similar changes in expenditure
on all forms of physical capital available in the data: IT; vehicles, plants and machinery;
and land and buildings. Following the EU Referendum, firms were also more likely to
reduce training expenditure, although the magnitudes of the changes were smaller than
those following the Financial Crisis of 2008.
Published on November 23, 2020
In series:OECD Economics Department Working Papersview more titles