Finance, Business Investment and Productivity

As labour supply in the United Kingdom nears capacity, the performance of labour productivity, defined as output per hour worked is crucial to future growth. Labour productivity growth is typically attributed to three
factors: changes in labour force quality, changes in the capital stock, and a total factor productivity residual (TFP), which represents the state of available technology. Here, I concentrate on the potential impact of the
recent Bank of England tightening, and changing financial conditions more generally, on business investment, which ultimately influences labour productivity growth.