The Growth of UK Companies and Their Contribution to Job Generation, 1985-1987

Gallagher, C. C.; Daly, M. J.; Thomason, J. C.
December 1991
Small Business Economics;Dec1991, Vol. 3 Issue 4, p269
Academic Journal
Theories of firm growth are reviewed and various models examined. The firm growth and job generation process in the UK over the period 1985-87, is examined empirically, by using the very large data files of the Dun and Bradstreet credit rating organisation. In the analysis, four computer processes were carried out; the sorting and matching of files, the cleaning of the data, the validation of the cleaned data, and the scaling up the results. The final adjusted data were grossed-up to provide an overview of the growth and job generation potential of UK firms. This is compared with past results for the periods 1971-81, and 1982-84. Small firms performed well, providing 48% of all new jobs, although consisting of only 21% of all employment in 1985. The 1000+ employee range provided only 137o of all new jobs over the period, although consisting of 37% of all employment in 1985. An overall trend of positive performance in smaller firms, and negative in larger firms was apparent. The 20-49 employee cohort performed unusually poorly in firm and job creation, against the expected pattern. The effect of takeovers, mergers and rationalisations on employment was examined. As expected, there was negligible restructuring of small firms, but over 5% of employees in the largest 1000+ cohort were involved in some form of reorganisation. In this and the two previous studies for 1971-81 and 1982-84, we found a consistent pattern of small firms as net generators of jobs, and large firms as net losers. This overall net behaviour is essential for the overall stability of the population, and can not be seen in 'good' or 'bad' terms. Bolton in 1971 found that the UK had an unduly small and weak small-firm sector. That trend to concentration is being reversed.


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