(Bloomberg) --
The lack of clarity about Brexit has lowered U.K. productivity by as much as 5%, according to research published by the National Bureau of Economic Research.
The effect is particularly large for highly productive businesses as these often have the greatest exposure to trade with the European Union, economists including Pawel Smietanka and Nicholas Bloom found.
When firms were asked to rank the level of uncertainty they are experiencing from one to four, those which said they faced the highest level saw productivity slide 1 percentage point more than the next group, the report said. It drew on data from Bank of England's Decision Maker Panel, which includes 5,900 U.K. companies employing about 14% of private-sector workers.
The economists suggest one reason for the productivity slowdown may be the time managers are spending on Brexit preparations. In the period November 2018 to January 2019, 10% of chief financial officers and 6% of chief executive officers were spending at least 6 hours a week on planning, and more than one in seven said they spent some time every week on it. Slowing investment in research and development, software and training, as well as fewer skilled foreign employees, may also have contributed.
Britain's exit from the EU differs to other “uncertainty shocks,” such as the collapse of Lehman Brothers or the 1973 oil price shock. Such events usually “generate a surge in uncertainty that subsides reasonably quickly as markets participants' initial fears are allayed by further information,” the economists wrote. “Brexit is unusual in that it generated persistent uncertainty.”
To contact the reporter on this story: Lucy Meakin in London at lmeakin1@bloomberg.net
To contact the editors responsible for this story: Paul Gordon at pgordon6@bloomberg.net, Brian Swint, David Goodman
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