Presented by Josh Martin (Office for National Statistics and ESCoE)
During the coronavirus pandemic, with many workers working from home and businesses closed down, it seems clear that the utilisation of capital assets fell. If we view this not as a fall in productivity, but as a fall in measured inputs, we may need to adjust the growth accounting framework for changes in capital utilisation. There is no internationally agreed method to adjust for capital utilisation; although a method using labour hours worked as a proxy for capital hours worked is most widely used. We offer an extension to this approach, overcoming conceptual issues by matching worker types (occupations) to capital types (assets). We use the hours worked of relevant occupations, relative to usual hours worked, in order to measure deviations in capital utilisation by asset. We also introduce a conceptual framework to apply these adjustments, noting that not all assets will be subject to variation in utilisation to the same degree. Our central estimate shows a decline in capital utilisation of around 9% in the UK market sector in the height of the pandemic, recovering over half of this by the end of 2020. This subdues, but does not eliminate, the fall in MFP through 2020.