Hostname: page-component-76fb5796d-9pm4c Total loading time: 0 Render date: 2024-04-25T08:23:20.589Z Has data issue: false hasContentIssue false
  • English
  • Français

The Financial Crisis, Bank Lending and UK Productivity: Sectoral and Firm-Level Evidence

Published online by Cambridge University Press:  01 January 2020

Rebecca Riley ,
Chiara Rosazza-Bondibene  and
Garry Young
Rebecca Riley*
Affiliation:
National Institute of Economic and Social Research and Centre for Macroeconomics
Chiara Rosazza-Bondibene
Affiliation:
National Institute of Economic and Social Research and Centre for Macroeconomics
Garry Young*
Affiliation:
Bank of England, NIESR and Centre for Macroeconomics
*
E-mail: r.riley@niesr.ac.uk
E-mail: Garry.Young@bankofengland.co.uk
Get access Rights & Permissions [Opens in a new window]

Abstract

This paper assesses the evidence and investigates some of the mechanisms by which the most recent banking sector crisis might have affected the supply side of the UK economy. We find clear evidence that the banking sector crisis affected credit supply to businesses and caused bank lending to decline. But we do not find much evidence of the heterogeneity in performance between different industrial sectors that would have been expected if banking sector impairment had been the key factor holding back productivity growth. Consistent with this we do not find strong evidence that a lack of reallocation of resources across businesses has been a substantial drag on productivity growth.

Keywords

creditproductivityrecessionB22D24E34G21
Type
Research Articles
Information
National Institute Economic Review , Volume 228 , May 2014 , pp. R17 - R34
Copyright
Copyright © 2014 National Institute of Economic and Social Research

Access options

Get access to the full version of this content by using one of the access options below. (Log in options will check for institutional or personal access. Content may require purchase if you do not have access.)

Footnotes

The financial support of the Economic and Social Research Council is gratefully acknowledged (Grant: ES/K00378X/1). We are also grateful to Nick Oulton, Martin Weale and participants at a seminar at Glasgow University for comments on an earlier version of this paper. The views expressed in this paper are those of the authors, and do not necessarily reflect those of the Bank of England or the Monetary/Financial Policy Committee. This work contains statistical data which is Crown Copyright; it has been made available by the Office for National Statistics (ONS) through the Secure Data Service (SDS) and has been used by permission. Neither the ONS nor SDS bear any responsibility for the analysis or interpretation of the data reported here. This work uses research datasets which may not exactly reproduce National Statistics aggregates.

References

Armstrong, A.Davis, P.Liadze, I. and Rienzo, C. (2013), ‘An assessment of bank lending to UK SMES in the wake of the crisis’, National Institute Economic Review, 225, F4–F14.CrossRefGoogle Scholar
Arrowsmith, M.Franklin, J.Gregory, D.Griffiths, M.Wohlmann, E. and Young, G. (2013), ‘SME forbearance and its implications for monetary and financial stability’, Bank of England Quarterly Bulletin, 53(4), pp. 296–303.Google Scholar
Ashworth, J.Goodhart, C.Secker, G.Stannard, I. and Baker, M. (2013), ‘Productivity slowdown largely cyclical: good news for the medium-term outlook’, Morgan Stanley research, 15 July 2013.Google Scholar
Barnett, A.Chiu, A.Franklin, J. and Sebastia-Barriel, M. (2014), ‘The productivity puzzle: a firm-level investigation into employment behaviour and resource allocation over the crisis’, Bank of England Working Paper No. 495, April.CrossRefGoogle Scholar
Bell, V. and Young, G. (2010), ‘Understanding the weakness of bank lending’, Bank of England Quarterly Bulletin, 50(4), pp. 311–20.Google Scholar
Broadbent, B. (2012), ‘Productivity and the allocation of resources’, speech at Durham Business School, September.Google Scholar
Caballero, R.Hoshi, T. and Kashyap, A. (2008), ‘Zombie lending and depressed restructuring in Japan’, American Economic Review, 98(5), pp. 1943–77.CrossRefGoogle Scholar
Disney, R.Haskel, J., and Heden, Y. (2003), ‘Restructuring and productivity growth in UK manufacturing’, Economic Journal, 113, pp. 666–94.CrossRefGoogle Scholar
Farrant, K.Inkinen, M.Rutkowska, M., and Theodoridis, C. (2013), ‘What can company data tell us about financing and investment decisions?’, Bank of England Quarterly Bulletin, 53(4), pp. 361–70.Google Scholar
Furstenberg, G. von and Kalckreuth, U. von (2006), ‘Dependence on external finance: an inherent industry characteristic?, Open Economies Review, Springer, 17(4), December, pp. 541–59.Google Scholar
Gilchrist, S. and Zakrajsek, E. (2011), ‘Credit spreads and business cycle fluctuations’, NBER Working Paper No 17021, May.CrossRefGoogle Scholar
Griliches, Z. and Regev, H. (1995), ‘Firm productivity in Israeli industry 1979–1988’, Journal of Econometrics, 65(1), January, pp. 175–203.CrossRefGoogle Scholar
HM Treasury (2013), ‘RBS and the case for a bad bank: the government's review’, HM Treasury, November 2013.Google Scholar
Khan, A. and Thomas, J.K. (2013), ‘Credit shocks and aggregate fluctuations in an economy with production heterogeneity’, Journal of Political Economy, December.CrossRefGoogle Scholar
Martin, B. and Rowthorn, R. (2012), ‘Is the British economy supply constrained II? A renewed critique of productivity pessimism’, Journal of Political Economy, 121 (6), December, pp. 1055–107.Google Scholar
Office for National Statistics (2014), ‘International comparisons of productivity – final estimates, 2012’, www.ons.gov.uk/ons/dcp171778_353315.pdf.Google Scholar
Oulton, N. (2013), ‘Medium and long-term prospects for UK growth in the aftermath of the financial crisis’, Centre for Economic Performance, Occasional Paper No. 37, October.Google Scholar
Oulton, N. and Sebastia-Barriel, M. (2013), ‘Long and short-term effects of the financial crisis on labour productivity, capital and output’, Bank of England Working Paper No. 470, January.CrossRefGoogle Scholar
Pessoa, J. and van Reenen, J. (2013), ‘The UK productivity and jobs puzzle: does the answer lie in labour market flexibility?’, Centre for Economic Performance Special Paper No. 31, June 2013.Google Scholar
Rajan, R. and Zingales, L. (1998), ‘Financial dependence and growth’, American Economic Review, 88(3), pp. 559–86.Google Scholar
Reinhart, C. and Rogoff, K. (2011), This Time is Different: Eight Centuries of Financial Folly, Princeton University Press.Google Scholar
Riley, R.Rosazza-Bondibene, C. and Young, G. (2014), ‘Productivity dynamics in the Great Stagnation: evidence from UK businesses’, paper presented at Royal Economic Society conference, April.Google Scholar
Tong, H. and Wei, S. (2011), ‘Did unconventional interventions unfreeze the credit market? Some international evidence’, available at http://siteresources.worldbank.org/INTMACRO/Resources/UnconventionalInterventionsTongWei061812.pdf.CrossRefGoogle Scholar
Young, G. (1996), ‘The influence of financial intermediaries on the behaviour of the UK economy’, NIESR Occasional Paper No. 50, December.Google Scholar