The Impact of Brexit on UK Firms

59 Pages Posted: 30 Aug 2019

See all articles by Nicholas Bloom

Nicholas Bloom

Stanford University - Department of Economics; National Bureau of Economic Research (NBER)

Philip Bunn

Bank of England

Scarlet Chen

Stanford University

Paul Mizen

University of Nottingham; Bank of England; Centre for Economic Policy Research (CEPR)

Pawel Smietanka

Bank of England

Gregory Thwaites

London School of Economics & Political Science (LSE) - London School of Economics

Multiple version iconThere are 3 versions of this paper

Date Written: August 30, 2019

Abstract

We use a major new survey of UK firms, the Decision Maker Panel, to assess the impact of the June 2016 Brexit referendum. We identify three key results. First, the UK’s decision to leave the EU has generated a large, broad and long-lasting increase in uncertainty. Second, anticipation of Brexit is estimated to have gradually reduced investment by about 11% over the three years following the June 2016 vote. This fall in investment took longer to occur than predicted at the time of the referendum, suggesting that the size and persistence of this uncertainty may have delayed firms’ response to the Brexit vote. Finally, the Brexit process is estimated to have reduced UK productivity by between 2% and 5% over the three years after the referendum. Much of this drop is from negative within-firm effects, in part because firms are committing several hours per week of top-management time to Brexit planning. We also find evidence for smaller negative between-firm effects as more productive, internationally exposed, first have been more negatively impacted than less productive domestic firms.

Keywords: Brexit, economic uncertainty, policy uncertainty

JEL Classification: D80, E66, G18, H32

Suggested Citation

Bloom, Nicholas and Bunn, Philip and Chen, Scarlet and Mizen, Paul and Smietanka, Pawel and Thwaites, Gregory, The Impact of Brexit on UK Firms (August 30, 2019). Bank of England Working Paper No. 818, Available at SSRN: https://ssrn.com/abstract=3445465 or http://dx.doi.org/10.2139/ssrn.3445465

Nicholas Bloom

Stanford University - Department of Economics ( email )

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National Bureau of Economic Research (NBER) ( email )

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Philip Bunn (Contact Author)

Bank of England ( email )

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Scarlet Chen

Stanford University ( email )

Stanford, CA 94305
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Paul Mizen

University of Nottingham ( email )

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United Kingdom
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Bank of England

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Centre for Economic Policy Research (CEPR)

London
United Kingdom

Pawel Smietanka

Bank of England ( email )

Threadneedle Street
London, EC2R 8AH
United Kingdom

Gregory Thwaites

London School of Economics & Political Science (LSE) - London School of Economics ( email )

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