Productivity, Investment and Profits During the Great Recession: Evidence from UK Firms and Workers*

The UK has recently experienced its deepest recession since the Second World War. One feature has been the resilience of employment, which fell far less than GDP. This led to a substantial fall in labour productivity and has given rise to a so-called ‘productivity puzzle’. In this paper, we use firm- and individual-level data to shed new light on these aggregate patterns and we examine changes in firm investment in physical capital and profitability. We provide evidence that labour productivity, investment and firm profitability