them through the lens of technological diffusion. in the fullness of time, innovation should be expected to diffuse through the economy, lifting all boats. that has been the lesson of every industrial revolution. yet in the uk, this technological trickle - down, from frontier to tail, appears to have dried up. a lengthening flotilla of boats has remained in dry dock. the diffusion engine appears, for them, to have seized up. defined as the share of firms with annualised productivity growth of less than ½ % between 2004 and 2014. schneider ( 2018 ). for example, gordon ( 2012 ) and brynjolfsson and mcafee ( 2014 ). to a lesser extent, there is some evidence of the same being true internationally ( berlingieri et al ( 2017 ) ). all speeches are available online at www. bankofengland. co. uk / speeches empirical evidence, using international innovation indices, supports this diagnosis. despite ranking th consistently in the top - 5 for innovation, the uk ranks only 38 globally for knowledge diffusion. lower even than england ’ s ranking in the world cup. this is far moreover, that diffusion ranking has fallen very sharply over recent years, again in lockstep with england ’ s world football ranking. it is not just that the uk has a lowly ranking on r & d expenditure by international comparison – at 1. 7 % of gdp, more than 1 percentage point below our main competitors. it is that three - quarters of the uk ’ s private r & d spending is concentrated in only 400 companies, less than 0. 01 % of the uk ’ s business population. among smaller firms, the uk ranks low down the european league table on in - house innovation and the introduction of new products and processes. typically, we think of “ research and development ” ( r & d ) as a rhyming couplet. in the uk ’ s case, the r and the d do not seem to rhyme. the uk does r well, as a world - leading innovation hub. but it does d poorly, where the d refers not just to development but the diffusion and dissemination of innovation to the long, lengthening, languishing lower tail. when it comes to innovation, the uk is a hub without spokes. understanding the barriers to diffusion what explains why the uk is poor at disseminating and diffusing the innovation it is rich at generating? answering that question is important for identifying potential barriers to improved diffusion and,

), haldane ( 2009 ), ferguson ( 2018 ). all speeches are available online at www. bankofengland. co. uk / speeches the theory goes, the larger those worker flows – so - called labour market “ churn ” – the greater ought to be the transfer of knowledge and skills and the faster the pace of technological diffusion. chart 20 plots a measure of labour market churn in the uk, with the us as a point of comparison. two points stand out. labour market churn rates are systematically higher in the us than in the uk, by a factor of around 2. this is likely to have contributed to slower rates of technological diffusion in the uk than us. it is also consistent with the uk ’ s significant productivity gap with the us. a second observation is that turnover in the uk labour market has been running well below its historic levels for much of the past decade. this probably reflects the impact of heightened job insecurity on people ’ s willingness to move firm in the aftermath of the crisis. one of the adverse side - effects has been a slowing in the flow of knowledge and ideas between firms, potentially gumming up the technology - transfer process. we can look at these churn rates on a more disaggregated basis by linking data on worker movements and company performance. chart 21 plots the evolution of churn rates for firms above and below the productivity median. pre - crisis churn rates were systematically ( around 20 % ) higher in high - productivity firms than in low - productivity ones. ideas and skills recycled more quickly in the upper than in the lower tiers of the productivity distribution. this may have contributed to the long tail problem. other things equal, one might wish to see higher rates of labour market churn among poor - performing companies as a means of injecting new ideas, experience and skills, speeding - up the process of technological diffusion to them. in practice, the opposite appears to have been the case. the lower tail of uk companies, pre - crisis, had a stickier workforce. post - crisis, things have changed. churn rates among high and low productivity firms have converged, with churn rates among higher productivity companies falling sharply. this matches the productivity patterns seen post - crisis, with the slowdown focussed on previously high - performing companies. slower churn among these companies, and the accompanying slower diffusion, may have contributed to their slowing productivity and them becoming part of that lower tail.