ONS says productivity mystery is down to zombie businesses

Ben Southwood
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PUZZLING weakness in productivity since the onset of the recession is down in part to zombie firms, the official statistics body suggested yesterday.

Despite a boom in employment past pre-recession highs, GDP remains several percentage points below its peak level. This means output per worker, or productivity, has fallen

This has defied usual trends, since productivity usually goes up during recessions, as firms lay off the least effective staff but hold onto their best performers.

But the Office for National Statistics (ONS) yesterday suggested this anomaly might be down to so-called zombie firms – businesses that can generate just enough cash to afford the interest payments on their loans, but not enough to invest or grow.

The ONS found that bigger, more domestically-orientated firms who were more invested in IT had a better productivity performance in 2009, the year for which the data is available, while smaller, export-orientated and technologically less developed firms did worse.

And there was divergence between the more and less effective firms – more productive firms got even more productive, while less productive firms got less productive, the ONS said.