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The impact of Brexit on UK businesses:
evidence from the Decision Maker Panel
6 March 2018
Any views expressed here are those reported to us by DMP members and do not necessarily reflect those
of the Bank of England or any of its Committees or state Bank of England policy.
Measuring Economic Uncertainty
Professor Nick Bloom
The Bank of England
HM Treasury
33
0
20
040
060
080
010
00
1998 2000 2002 2004 2006 2008 2010 2012 2014 2016
Source: www.policyuncertainty.com. Monthly data from 2 UK newspapers (Times and Financial
Times). Data to July 2016
Po
lic
y U
nc
ert
ain
ty In
de
x
Treaty of
Accession
/
Gulf War
II
Russian
Crisis/LTCM
Northern
Rock &
Global
Financial
Crisis
General
Election
Euro Crisis
Sco
ttis
h R
efe
rend
um
9/11
Ele
ction
bu
ild-u
p
BrexitBut it was MASSIVE in the UK:
more than twice as large as any
event in the last 20 years
UK Policy Uncertainty Index – striking Brexit spike
44
The Decision Maker Panel project is:
• Timely
• Well resourced: £1.3m from ESRC, Bank of England, Nottingham
and Stanford Universities
• Supported by global expertise
• Informed by senior executives in more than 3000 businesses
across the UK
• Engaged with policymakers – MPC, HM Treasury, BEIS, DExEU
Measuring Economic Uncertainty
55
The panel is continuing to grow in size
• Response rate is around 50% in any given month
0
1000
2000
3000
Nu
mb
e o
f pan
el m
em
be
rs
Month of survey
66
The panel covers nine sectors, and since Jan 2018 include financial
firms. It covers large firms and SMEs.
We can match firms to a financial database giving their characteristics
e.g. size, leverage, profitability, cash flow, etc.
It matches the pattern in the UK Business Register
0 10 20 30
Manufacturing
Construction
Wholesale & Retail
Transport & Info
Accom. & Food
Real Estate
Prof & Admin
Human Health
Other services
DMP weighted
Business Register
Percentage of employment
0
10
20
30
40
50
60
70
10-49 50-99 100-249 250+
DMP weighted
Business Register
Percentage of employment
Number of employees
77
DMP members are spread across the UK
The concentration in London
reflects the fact that many large
firms that operate through out the
UK nevertheless have their HQ
in London.
88
A short online survey asks about expected outcomes e.g. sales revenue
99
You are asked to give chances out of 100 to each outcome
Aim for 6-7 questions that take about 10 minutes to complete.
1010
02
55
0
-50 0 50 100
02
55
0
-50 0 50 100
02
55
0
-50 0 50 100
02
55
0
-50 0 50 100
02
55
0
-50 0 50 100
Typical data: Distribution of expected sales growth scenarios
Sh
are
of re
sp
on
dents
(un
we
igh
ted
), %
Annual nominal sales growth in lowest scenario, %
Annual nominal sales growth in low scenario, %
Annual nominal sales growth in middle scenario, %
Annual nominal sales growth in high scenario, %
Annual nominal sales growth in highest scenario, %
1111
How important is Brexit as a source of uncertainty?
In September 2016 we asked the question:
‘How much has the result of the EU-referendum impacted the
level of uncertainty affecting your business?’
We asked the same question in February-April 2017 and in
August-October 2017.
1212
Brexit is considered an important source of uncertainty
0
10
20
30
40
50
Not important One of many sources One of top 2 or 3sources
Largest currentsource
September 2016
February to April 2017
August to October 2017
Percentage of respondents
1313
Brexit as a source of uncertainty by industry
10 15 20 25 30 35 40 45 50 55
Manufacturing
Construction
Wholesale & Retail
Transport & Info
Accom. & Food
Real Estate
Prof & Admin
Human Health
Other services
Percentage of respondents who see Brexit as at least one of top
2 or 3 current sources of uncertainty
Average
1414
How does Brexit impact on business decisions and conditions?
Companies expect that it is
more likely than not that
Brexit will reduce their sales
and investment; they
expect an increase in their
unit costs, labour costs
and financing costs.
Exports are more or less
unchanged.-30 -10 10 30 50
Sales
Exports
Investment
Unit costs
Labour costs
Financing costs
Wages
Share of respondents
(unweighted), %
1515
Impact of Brexit on business decisions and economic conditions is rather
negative
When we weight these
responses by firm size –
placing more importance on
the responses of larger firms
– the expected impact of
Brexit becomes even more
negative.
Larger firms are more
pessimistic about the
impact of Brexit than smaller
firms.
-30 -10 10 30 50
Sales
Exports
Investment
Unit costs
Labour costs
Financing costs
Wages
Share of respondents,%
1616
Investment growth has been lower for firms who see Brexit as an
important source of uncertainty
-6
-4
-2
0
2
4
6
Not important One of many One of top 2 or 3sources
Top source
Past year (2017 H1)
Brexit as a source of uncertainty
Average annual nominal investment
growth (per cent)
1717
Investment growth also lower for firms who expect Brexit to lower sales
-8
-4
0
4
8
12
16
No/positive impact expected Chance of negative impact Negative effect likely
Past year (2017 H1)
Brexit impact on sales in 2020
Average annual investment growth (per cent)
1818
Estimates of impact of Brexit on aggregate investment growth
Past year Next year
Brexit reducing future sales -1.6pp to -2.0pp No effect
+ Brexit related uncertainty -1.0pp to -2.5pp -1.6pp to -1.9pp
= Total Brexit effect on
investment growth in 2017 H1
-3.0pp to -4.2pp -1.6pp to -1.9pp
• Effects on investment growth smaller for year ahead, but still implies levels
effect continues to build
1919
Aggregate business investment growth
-4
-2
0
2
4
6
8
10
12
14
2013 2014 2015 2016 2017
Nominal business investment
Counterfactual without Brexit effect
Percentage change on a year earlier
2020
How does Brexit impact decisions about relocating abroad?
Between May and July
2017, panel members
were asked about the
possibility of moving parts
of their business abroad.
Vast majority said that the
chance is zero or close to
zero.
One in six panel members
said that the chance is
10% or more.
0
20
40
60
80
100
0% Less than10%
10% or more
Share of respondents (weighted), %
Probability
2121
Brexit impacts decisions about relocating back to UK
Considering relocation back to
the UK:
• 69% said that the question
was not applicable (no
overseas operations);
• 27% said that there was less
than 10% chance of
relocation to the UK;
• and 4% said that there was
more than 10% chance of
relocation.0
10
20
30
40
50
60
70
80
Notapplicable
Less than10%
10% or more
Share of respondents (weighted), %
2222
How much planning time is devoted to Brexit?
Table 1 Number of hours a week spent on preparing for Brexit (share of respondents).
CEO CFO
None 41% 38%
Up to 1 hour 37% 39%
1 to 5 hours 14% 18%
6 to 10 hours 3% 3%
More than 10 hours 1% 1%
Don't know 4% 2%
• Around three quarters of CEOs and CFOs are spending no more than an
hour a week on preparing for Brexit, but 15-18% spend a up to half a day a
week and the remaining 6-10% more than that.
• Impact on productivity?
23
0
5
10
15
20
25
30
35
2019 2020 2021 2022 2023+ Never
Average probability (per cent)
Transition period Never'No deal'
When do DMP members expect to the UK to leave the EU?
• CFOs place less probability on the UK leaving the EU in 2019 since
December Summit, and greater probability on leaving 2021 or later.
2424
• The DMP is a large new representative business survey
• It is an important source of information on how Brexit is
affecting UK businesses
• The survey shows how Brexit is particularly affecting firms
exposed to the EU, but it is not important for all
• CFOs expect Brexit to lead to lower sales and higher costs
• Brexit is estimated to have reduced investment growth by
3-4pp in the year after referendum
Summary
3737
Brexit as a source of uncertainty by largest export market
20
25
30
35
40
45
50
55
Doesn't export EU Non-EU
Percentage of respondents who see Brexit as at least one of top
2 or 3 current sources of uncertainty
Largest export market
3838
Brexit as a source of uncertainty by share of imports in total costs
20
25
30
35
40
45
50
55
0-5% 5-20% 20%+
Percentage of respondents who see Brexit as at least one of top
2 or 3 current sources of uncertainty
Percentage of total costs that are imports
3939
Brexit as a source of uncertainty by share of workforce who are EU
nationals
20
25
30
35
40
45
50
55
<1% 1-5% 6-10% >10%
Percentage of respondents who see Brexit as at least one of top
2 or 3 current sources of uncertainty
Percentage of employees who are EU nationals
4040
Brexit as a source of uncertainty by productivity quartile
20
25
30
35
40
45
50
55
Lowest Second-lowest Second-highest Highest
Percentage of respondents who see Brexit as at least one of top
2 or 3 current sources of uncertainty
Productivity quartile
4141
Brexit as a source of uncertainty by firm size
20
25
30
35
40
45
50
55
10-49 50-99 100-249 250+
Percentage of respondents who see Brexit as at least one of top
2 or 3 current sources of uncertainty
Number of employees
4242
Brexit as a source of uncertainty by ownership
20
25
30
35
40
45
50
55
UK EU Non-EU
Percentage of respondents who see Brexit as at least one of top
2 or 3 current sources of uncertainty
Location of ultimate owner
4343
• Export to the EU
• Have imports make a substantial contribution to their costs
• Depend on EU migrant labour
• Be more productive than average
Companies most likely to see Brexit as an important source of
uncertainty tend to:
4444
A range of surveys point to Brexit weighing on investment
49
44
37
36
30
21
0 10 20 30 40 50
EEF (a)
Lloyds (b)
Agents (c)
CBI (d)
Deloitte (e)
Thomson Reuters (f)
Percentage of respondents reporting a negative impact
(a) Percentage of respondents who are holding off or limiting investment because of Brexit.
(b) Response to the EU referendum: delaying investment decision-making.
(c) Percentage reporting that economic uncertainty, expected future international trade arrangements or other Brexit factors were affecting investment negatively.
(d) Negative responses to: How has Brexit impacted your organisation’s investment decisions?
(e) CFOs who expect capital expenditure by their business to decrease over the next three years as a consequence of Brexit.
(f) Impact of Brexit: holding off from expanding operations in the UK.
