Brexit uncertainty
The share of firms reporting that Brexit was an important source of uncertainty for their business remained elevated at 55% in November (Chart 1). That was similar to recent months and well above the first two years after the EU referendum. Over that earlier period, 38% of businesses had reported that Brexit was an important source of uncertainty for them, on average.
Chart 1 Brexit uncertainty remains elevated
Brexit-related uncertainty was expected to take longer to resolve than businesses previously thought. A new question was introduced in November which retrospectively asked firms about when they had expected Brexit uncertainty to be resolved shortly after the referendum. At that time, 86% of firms had expected Brexit-related uncertainty to have been resolved by now (Chart 2).
Over the course of this year, there has been a steady decline in the percentage of companies expecting uncertainty to be resolved in 2019 (Chart 3). During the first half of the year, that was mainly replaced by a growing share of businesses that expected Brexit uncertainty to be resolved in 2020. But in more recent surveys, a growing share have reported that they do not expect uncertainty to be resolved until at least 2021. That share reached 37% in November.
Chart 2 Uncertainty has persisted for longer than expected at the time of the referendum
Chart 3 Brexit uncertainty is expected to last longer
Expectations for when the UK will leave the EU
The UK’s departure date from the EU was extended to 31 January 2020 before the November survey opened (the survey was in the field from 8 to 22 November). That appears to have been reflected in respondents’ expectations for when the UK will leave the EU. The average probability placed on leaving the EU in 2019 fell sharply between October and November (Chart 4), whereas the average probability of the UK leaving the EU in 2020 rose from 36% to 63%. And the average probability of leaving in 2021 or later increased from 8% to 18%.
In the latest survey, the average probability of the UK leaving the EU in 2020 with a deal was estimated at 46%. The average chance of leaving without a deal in 2020 was put at 16%. The weight on no deal has fallen since August.
Chart 4 Respondents thought it was increasingly likely that the UK will leave the EU in 2020
Investment
Panel members continued to report that investment growth had been subdued. In the August to October surveys, nominal investment was estimated to have fallen by an average of 2% over the year to 2019 Q2, continuing the recent trend of weak investment growth.
Looking ahead, businesses expected a modest pickup in investment growth, although Brexit was expected to remain a drag. Nominal investment was expected to increase by around 3% over the year to 2020 Q2 (based on the August to October surveys).
In the November survey, the average probability attached to Brexit lowering investment over the next year was 29% (Chart 5), with a 9% chance of a positive impact. These probabilities were similar to those reported when the question was last asked in May to July.
Chart 5 Firms continued to report that Brexit was more likely to lower investment over the next year than to increase it
Methodology
The DMP consists of the chief financial officers of small, medium and large UK companies operating in a broad range of industries.
We survey panel members to monitor developments in the UK economy and to track businesses’ views on them. In particular, we try to understand how Brexit is affecting British businesses. This work complements the intelligence gathered by our Agents.
This note is a summary of surveys conducted with DMP members up to November 2019. The November survey was in the field between 8 and 22 November. The October survey was in the field between 11 and 25 October. In November, there were around 8,000 panel members and we got around 3,000 responses.
We now publish aggregate monthly data for a limited number of DMP series. The latest monthly data up to November were released on 5 December. Monthly data from the December survey will be published on 2 January 2020.
Aggregate level data for all survey questions are published on a quarterly basis. Data from the August to October surveys were released on 7 November. The next set of quarterly data will be published alongside monthly data for January on 30 January 2020.
The panel was set up in August 2016 by the Bank of England and with academics from Stanford University and the University of Nottingham. It was designed to be representative of the population of UK businesses. All results are weighted. See 'Tracking the views of British businesses: evidence from the Decision Maker Panel' for more details.
The DMP receives funding from the Economic and Social Research Council.