Firm Investments in Skills in UK – EU Referendum and the Financial Crisis made firms less likely to increase expenditure on worker training

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.

Key Findings:

• Firms were less likely to increase expenditure on worker training in the period after the EU Referendum relative to the period before. There is also tentative evidence to suggest that firms were more likely to reduce expenditure on worker training in the period after the EU Referendum relative to the period before.
• The changes in training expenditure that have occurred since the Referendum have varied across industries. Real estate, professional, scientific and technical activities are among those most likely to reduce expenditure in training while firms in administrative activities and accommodation services were more likely to increase training expenditure.
• The changes in training expenditure that have occurred since the Referendum have varied across regions. The largest decline in the probability of increasing training expenditure has been in London and the South East.
• Larger firms were most likely to stop increasing or reduce their expenditure on worker training.
• Firms were more likely to reduce expenditure on all forms of physical capital in the period after theReferendum relative to before.
• Firms were more likely to reduce training expenditure in the period following the Financial Crisis relative to the period before.

Chosen excerpts by Job Market Monitor. Read the whole story @ OECD iLibrary | Firm investments in skills and capital in the UK services sector