February 25 2007 - New research from the Globalisation and Economic Policy Centre at The University of Nottingham has found that
1 in 7 private sector jobs are lost in the UK each year but more are created than destroyed. Based on 1997-2005 data from Customs and Excise (VAT registered businesses) and the Inland Revenue (PAYE registered businesses), the first comprehensive survey into this topic found that 2.65 million British private sector jobs are destroyed annually, and 2.76 million created (the equivalent of 51 000 lost and 53 000 created each week).
Dr Peter Wright, associate professor, said:
"People might be surprised at the results. It doesn't mean all these workers have been fired - when a firm shrinks it may do so by not replacing workers who leave voluntarily - but it shows how dynamic the UK employment market is.
"It is not necessarily a bad thing for the economy that we have so much movement in the employment market, but it does mean that there are likely to be many people changing jobs involuntarily, which may involve considerable adjustment costs. And it also has important implications in terms of training provision as many workers are likely to need to regularly change or update their skills if they are to stay employed and maintain income levels in such a dynamic market."
The research shows the importance of firms with less than 100 employees to the economy. Small businesses employ around half of the workforce and account for up to 70 per cent of jobs created, but also for 60 per cent of jobs destroyed.
Peter Wright commented:
"There has always been a big debate about whether small entrepreneurial firms or large firms are most important in terms of job creation. If you talk to most economists they would probably say that big firms are the key to understanding how the economy works, but within business schools there has always been a bias towards small firms and the outcome of this debate does have importance in terms of public policy.
"It is clear from this research that small firms employ a significant proportion of the workforce and account for most new jobs but, on the flip side, their failure rates are much higher. This means that Government support to small firms is inherently risky, but if the Government could identify why so many of these firms fail it could have a significant impact on net job creation."