This paper examines the contribution of the Conservative government's `free labour market' policies to recent productivity and economic performance, drawing on a detailed study of restructuring in the British construction industry. These policies are shown to have given a beneficial short-term boost to labour utilisation and cost reduction, which complemented improvements in managerial performance induced by more autonomous economic forces operating at sector and enterprise levels. However, by providing opportunities to casualise employment standards, deregulation relieved the pressures on firms to introduce more innovative technologies and work re-organisation. Doubt is cast on whether recent productivity gains can be sustained, and on the long-term efficacy of the government's free labour market policies.
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