Productivity debacle in the UK: Do post-crisis firm cohorts explain the performance puzzle?

This paper investigates how the aftermath of the 2008 crisis affected firm productivity in the UK, focusing particularly on the cohort effect of firms established after 2008 - a previously overlooked aspect of the crisis - as well as the interaction with access to credit, which we test using firm-specific and time-varying credit scores. For identification, a matched sample is used based on credit score, firm age, size and ownership status, combining propensity score matching with difference-in-differences. While we find evidence that smaller firm size and changes in credit conditions affect productivity, about half of the difference in productivity remains unexplained. When we extend the matching analysis to examine across sectors and cohorts, we find that the low productivity performance 2011-16 is driven primarily by newer firms in the services sector, rather than in manufacturing. Within services, the underlying productivity puzzle is driven by a cessation of output growth in high-productivity financial services, while abundant labour supply has led to a `levelling down' of performance of newer firms in the rest of services, in line with relatively low-productivity manufacturing.