Job Creation, Job Destruction and the Role of Small Firms: Firm-Level Evidence for the UK


  • Financial support from the Department for Trade and Industry and the Leverhulme Trust (Programme Grant F114-BF) is gratefully acknowledged. Alexander Hijzen also acknowledges financial support from the Economic and Social Research Council under PTA-026-27-0733. The authors thank two anonymous referees for suggestions which have greatly improved the article. They also thank the staff of the Virtual Microdata Lab at the Office for National Statistics (ONS) for their help in accessing the data. The usual disclaimer applies. This work contains statistical data from ONS which is Crown copyright and reproduced with the permission of the controller of Her Majesty's Stationery Office (HMSO) and Queen's Printer for Scotland. The use of the ONS statistical data in this work does not imply the endorsement of the ONS in relation to the interpretation or analysis of the statistical data. This work uses research datasets which may not exactly reproduce National Statistics aggregates. Copyright of the statistical results may not be assigned, and publishers of this data must have or obtain a licence from HMSO. The ONS data in these results are covered by the terms of the standard HMSO ‘click-use’ licence. The opinions expressed in this article are those of the authors and do not necessarily reflect those of the Organization for Economic Cooperation and Development or its member states.


Evidence on job creation and destruction for the United Kingdom is limited, dated, and refers almost entirely to the manufacturing sector. We use firm-level data from 1997 to 2008 for almost all sectors, including services, and show that firms in the service sector exhibit much higher rates of job creation, but almost exactly the same rates of job destruction as those in manufacturing. ‘Small’ firms account for a disproportionately large fraction of job creation and destruction relative to their share of employment. Jobs created by small firms are no less likely to persist than those created by large firms.