Results from the Decision Maker Panel survey - 2019 Q2

In August 2016, together with academics from Stanford University and the University of Nottingham, the Bank of England 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.
Published on 20 June 2019

Overview

In August 2016, together with academics from Stanford University and the University of Nottingham, the Bank of England 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 are a valuable source of information, complementing the intelligence gathered from Agents’ contacts.2

This box summarises results from the surveys conducted between February and April, focussing on Brexit-related uncertainty and its determinants.  Around 8,000 businesses had agreed to be part of the panel at the time of the April 2019 survey with around 3,000 responses a month being received.

Importance of Brexit as a source of uncertainty

In the February to April surveys, 57% of businesses reported that Brexit was in their top three current sources of uncertainty.  That proportion was slightly higher than in the November to January surveys, where it averaged 54%, and it was the highest quarterly value recorded since the survey was launched in 2016.  However, it fell back a little in the monthly data within the latest quarter from 58% in February to 53% in April (Chart A).

In the recent data, the number of panel members citing Brexit as an important source of uncertainty for their business remained well above the level in the first two years after the referendum, when it averaged just under 40%.

Chart A Many companies continued to report that Brexit was in their top three sources of uncertainty (a)

box-2-chart-a
  • Sources: DMP and Bank calculations.

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

     

Many businesses expected Brexit-related uncertainty to be persistent, and, during the latest survey period, firms increasingly thought that uncertainty would take longer to resolve. In February, around 45% of panel members affected by Brexit-related uncertainty reported that they expected uncertainty to be resolved by the end of 2019 (Chart B). By April, that proportion had fallen to around 35% as it became clear that the UK’s withdrawal from the EU, initially intended for 29 March, would be delayed.  That meant that 65% of businesses did not expect Brexit uncertainty to be resolved this year at the time of the April survey, up from 55% in February. More firms thought that Brexit uncertainty would be resolved during 2020, while the share expecting a resolution in 2021 or beyond was more stable at around 20%.

Chart B In April, fewer companies expected Brexit-related uncertainty to be resolved this year (a)

box-2-chart -b
  • Sources: DMP and Bank calculations.
    (a) Question: ‘When do you think it is most likely that the Brexit-related uncertainty facing your business will be resolved?’

Sources of Brexit-related uncertainty

The DMP can also be used to help understand the reasons why firms are uncertain about Brexit.  A new question added to the DMP survey between February and April asked panel members about the sources of Brexit-related uncertainty for their business.

There was not one single factor that clearly stood out as the main source of Brexit uncertainty.  Different factors were reported to be important for different businesses, although concerns about supply chains and customs were the most commonly cited.3 About 40% of companies that cited Brexit-related uncertainty reported uncertainty about supply chains and customs arrangements as being in the top three sources of Brexit-related uncertainty for their business (the sum of the dark and light red bars on Chart C). That was closely followed by uncertainty about future demand for the goods and services that companies produce, which was highlighted by 37%. Labour availability was the least frequently mentioned source of Brexit uncertainty, although this was still thought to be important for 28% of respondents.

Chart C Uncertainty about customs and supply chains were the most commonly cited sources of Brexit uncertainty (a)

box-2-chart-c
  • Sources: DMP and Bank calculations.
    (a) Question: ‘How important are the following factors as sources of Brexit-related uncertainty for your business at present?’ Respondents could select one of the options for each category shown above.
Unsurprisingly, the source of Brexit-related uncertainty was different for different types of firms. For example, firms who said that uncertainty surrounding supply chains was particularly important tended to have a much higher share of their costs accounted for by EU imports, whilst those most uncertain about customs and regulations tended to trade more with the EU. Firms who cited labour availability as their main source of uncertainty tended to have a much higher share of EU migrants in their workforce.

Stockpiling and Brexit-related uncertainty

The anticipated withdrawal of the UK from the EU led some companies to increase their stock holdings. In the February to April surveys, around 30% of all firms reported that they had built up stocks of some form due to Brexit. 17% said they had increased stocks of raw materials, 13% had built up their holdings of intermediate goods, and 19% said that they had stockpiled their own finished goods. Of those who had increased their stocks, around 40% of firms reported that they had increased stocks by 10% or more, with the remainder increasing their stocks by less than 10%. These proportions were broadly similar across the different types of stocks.

Increases in inventories due to Brexit were concentrated in particular sectors. Firms in manufacturing were most likely to have stockpiled raw materials (around 55% said that they had done so), while wholesale and retailers were most likely to have built up stocks of finished goods (around 40% reported this) (Chart D).

Chart D Manufacturers were the most likely companies to have increased stocks due to Brexit (a)

Chart D Percentage of respondents increasing stocks due to Brexit by industry
  • Sources: DMP and Bank calculations.

    (a) Question: ‘How have you changed your stocks of the following items ahead of the UK leaving the EU?’ Respondents could select one of the following options for each item (raw materials, intermediate goods, own finished goods): a large increase of 10% or more; a minor increase of less than 10%; no material change; a minor reduction of less than 10%; a large reduction of 10% or more; or not applicable. The chart shows the percentages of businesses that increased stocks.

Uncertainty also appeared to have been an important factor affecting businesses’ decisions to increase stocks. Those who reported that Brexit was an important source of uncertainty for their business were much more likely to have increased stocks than firms who saw Brexit uncertainty as less important (Chart E).

Chart E Companies that reported that Brexit was an important source of uncertainty were more likely to have increased stocks (a)

Chart E Percentage of respondents increasing stocks by level of Brexit-related uncertainty
  • Sources: DMP and Bank calculations.

    (a) The chart shows percentage of businesses that increased any type of stocks. See footnotes in Chart A and D for details of questions asked.
  • 1. This project is supported by the Economic and Social Research Council (grant number ES/P010385/1).

    2. The 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. 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. For details on the methodology see our Quarterly Bulletin article 'Tracking the views of British businesses: evidence from the Decision Maker Panel'.  View the aggregate-level data from the DMP survey. All results are weighted.

    3. The conclusion that Brexit uncertainty reflects a number of different factors is consistent with analysis reported in the December 2018 summary of results from the Decision Maker Panel, which showed how the Brexit uncertainty measure shown in Chart A was higher for businesses more exposed to the rest of the EU either through exporting, importing, or employing relatively more staff from other EU countries.

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