Results from the Decision Maker Panel survey - 2019 Q1

In August 2016, together with academics from Stanford University and the University of Nottingham, the Bank set up the Decision Maker Panel (DMP) survey to help monitor developments in the UK economy and to track businesses’ expectations and the uncertainties surrounding them.

Overview

In August 2016, together with academics from Stanford University and the University of Nottingham, the Bank set up the Decision Maker Panel (DMP) survey to help monitor developments in the UK economy and to track businesses’ expectations and the uncertainties surrounding them.1 The responses from the DMP survey have been a valuable source of information, complementing the intelligence gathered from Agents’ contacts.2

This box summarises results from the November 2018 to January 2019 surveys, focusing on businesses’ views about Brexit and investment.3

Importance of Brexit as a source of uncertainty

Recent data indicate that Brexit is becoming an increasingly important source of uncertainty for businesses (Chart A). In the latest November to January surveys, 54% of businesses reported that Brexit is currently one of the top three sources of uncertainty for them. This proportion has increased from just below 40% in the first half of 2018 and is now at the highest value recorded since the survey was launched.

Chart A Importance of Brexit as a source of uncertainty (a)

Chart A Importance of Brexit as a source of uncertainty
  • Notes

    Sources: DMP and Bank calculations.

    (a) Question: ‘How much has the result of the EU referendum affected the level of uncertainty affecting your business?’.

Investment decisions and Brexit

Official economic data suggest that investment growth has been weak in recent years, especially in the post-referendum period. DMP members are also asked about their current and past level of capital spending as well as their expectations for investment over the next year. According to the latest results, averaging across firms, annual growth in nominal capital expenditure fell back from around 4% in 2018 Q2, to around 1% in 2018 Q3. It has generally been subdued since the referendum (shown by the solid red line in Chart B). Looking a year ahead, investment growth is expected to remain modest with capital spending expected to grow by around 2.3% in the year to 2019 Q3 (the dashed red line in Chart B).

Brexit uncertainty appears to have had a substantial dampening effect on investment growth. Companies who view Brexit as an important source of uncertainty reported that the level of their investment was around 5% lower than a year ago in 2018 Q3 (shown by the red line in Chart C), while firms who did not view Brexit as an important source of uncertainty reported an increase of almost 10% (shown by the blue line in Chart C).

Over the period since the referendum, there appears to have been three phases to the impact of Brexit uncertainty on investment (Chart C). In the first year after the referendum, investment growth was lower for firms who reported that Brexit was an important source of uncertainty than it was for firms who reported that Brexit was a less important source of uncertainty. There was then a period when investment growth for these two groups was more similar, before a third phase since the middle of 2018 when investment growth has weakened again for firms who say that they are more exposed to Brexit uncertainty.

Brexit may weigh on future investment decisions too. In the latest November to January surveys, panel members thought, on average, that there was a 33% chance that Brexit would reduce capital expenditure over the following year (Chart D). The probability of Brexit increasing investment spending was estimated at 8%, with a 59% chance of no impact.4 The probability attached to Brexit reducing investment over the next year was higher in the latest survey than when the question was last asked in May-July 2018, although it was similar to the level reported shortly after the referendum in September-October 2016.

Chart B Realised and expected growth in capital expenditure

Chart B Realised and expected growth in capital expenditure
  • Notes
    Sources: DMP and Bank calculations.

Chart C Realised and expected growth in capital expenditure by importance of Brexit as a source of uncertainty (a)

Chart C Realised and expected growth in capital expenditure by importance of Brexit as a source of uncertainty
  • Notes

    Sources: DMP and Bank calculations.

    (a) Brexit uncertainty question is defined in the footnote to Chart A.

Chart D Expected impact of Brexit on capital expenditure (a)

Chart D Expected impact of Brexit on capital expenditure
  • Notes

    Sources: DMP and Bank calculations.

    (a) Question: ‘Could you say how the UK’s decision to vote leave in the EU referendum is likely to influence your capital expenditure over the next year? What is the percentage likelihood (probability) that it will: i) Have a large positive influence on capital expenditure, adding 5% or more ii) Have a minor positive influence on capital expenditure, adding less than 5% iii) Have no material impact on capital expenditure iv) Have a minor negative influence on capital expenditure, subtracting less than 5% v) Have a large negative influence on capital expenditure, subtracting 5% or more’.

Preparing for Brexit

Responses to the most recent surveys suggested that three quarters of CFOs were spending some time planning for Brexit in November-January 2019, up from around 60% a year earlier (Chart E). The amount of time spent planning for Brexit was also reported to have increased. For example, the share of CFOs spending more than one hour a week on Brexit planning increased from 21% to 43%.

Chart E Business executives planning for Brexit (a)

Chart E Business executives planning for Brexit
  • Notes

    Sources: DMP and Bank calculations.

    (a) Question: ‘On average, how many hours a week are the CEO and CFO of your business spending on preparing for Brexit at the moment? Please select one of the options: i) None ii) Up to 1 hour iii) 1 to 5 hours iv) 6 to 10 hours v) More than 10 hours vi) Don’t know’.

  • Footnotes

    This project is supported by the Economic and Social Research Council (grant number ES/P010385/1).

    2The DMP comprises Chief Financial Officers (CFOs) from small, medium and large UK companies operating in a broad range of industries. It is designed to be representative of the population of UK businesses. Around 7,300 businesses had agreed to be part of the panel at the time of the January 2019 survey. The survey runs monthly with panel members receiving one third of a quarterly questionnaire each month. The response rate has averaged around 40% in recent months. View the aggregate data from surveys up to January 2019 and details on questions

    3For details on the methodology see our Quarterly Bulletin article 'Tracking the views of British businesses: evidence from the Decision Maker Panel'. All results are weighted.

    4This question was referring to the level rather than growth of investment. Some businesses may have already reduced investment due to Brexit and their responses may be relative to their current level of investment.

This page was last updated 21 March 2019
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