U.K. Needs More ‘Superstar’ Firms to Tackle Inequality, IFS Says

(Bloomberg) -- Inequalities in the U.K. risk widening further unless action is taken to boost the number of high-performing firms, according to the Institute for Fiscal Studies.

The influential researcher said “superstar” companies employ only one in 10 workers, according to a report published Thursday. For the rest, productivity and wages have stagnated over the past quarter-century

The gap, the IFS said, has contributed to the feeble productivity growth that has blighted the economy since the financial crisis. It urged the government to tackle the market power that puts the best performers at an advantage.

 “Any concerted policy aimed at influencing inequalities will therefore need to consider policy on things such as competition, regulation and innovation,” said IFS Deputy Director Robert Joyce.

The analysis, part of the IFS Deaton Review of Inequalities launched in 2019, comes amid a deepening cost of living crisis that is falling hardest on low-income households.

The study found that the productivity and average wages of the median firm today are the same as in the mid 1990s, after accounting for inflation. But they are “substantially higher” among the best-performing companies.

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