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Brexit planning has cut productivity of UK firms - Bank of England

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Brexit planning has cut productivity of UK firms - Bank of England
FILE PHOTO: The Canary Wharf financial district stands beyond the Greenwich Maritime Museum in London, Britain August 11, 2019. REUTERS/Simon Dawson   -   Copyright  SIMON DAWSON(Reuters)
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LONDON (Reuters) – The Brexit process has cut the productivity of British companies by between 2% and 5% since the 2016 vote to leave the European Union, according to a research paper published by the Bank of England on Friday.

Most of the shortfall reflects a drop in productivity within businesses as senior managers commit several hours per week to planning for Brexit, the researchers said.

“We also find evidence for smaller negative between-firm effects as more productive, internationally exposed, firms have been more negatively impacted than less productive domestic firms,” the authors wrote.

Overall, the paper adds to evidence that the Brexit vote has taken a toll on businesses even before Britain leaves the EU, now due to take place on Oct. 31.

Proponents of Brexit say Britain’s economy, the world’s fifth largest, will be able grow faster and with more dynamism after it leaves the EU and uncertainty subsides.

Based on an analysis of the BoE’s Decision Makers’ Panel survey of executives, the research showed the anticipation of Brexit had reduced business investment by around 11% over the last three years.

Official data show business investment in Britain has flatlined over the last few years, ending a rising trend that took place from the aftermath of the financial crisis through to 2015.

The paper was authored by economists Nicholas Bloom and Scarlet Chen of Stanford University, Bank of England economists Philip Bunn and Pawel Smietanka, Paul Mizen of the University of Nottingham, and Gregory Thwaites of the LSE Centre for Macroeconomics.

(Reporting by Andy Bruce; Editing by Jan Harvey)

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