Ben Broadbent: Investment and uncertainty - the value of waiting for news

Speech by Mr Ben Broadbent, Deputy Governor for Monetary Policy of the Bank of England, at the Imperial College Business School, London, 20 May 2019.

The views expressed in this speech are those of the speaker and not the view of the BIS.

Central bank speech  | 
21 May 2019

Good evening!

Today I want to talk about "Brexit uncertainty" and investment. This is hardly a new topic. Indeed I put the words in quotes because the phrase has become so commonplace. At least in the context of the economy one rarely hears one without the other attached to it.

There are good reasons for that, of course.

We know from general experience - from the empirical evidence in the UK and elsewhere (Chart 1) - that greater uncertainty tends to reduce investment spending.

It's also clear, from direct conversation and from more formal surveys, that many businesses are apprehensive about Brexit. Over half of the respondents to the Bank's Decision Maker Panel, a survey of over 7,000 firms, now count Brexit as one of their three most important sources of risk (Chart 2).1 According to a survey by the Bank's Agents the outcome they think will have the most negative economic impact is a no-deal exit with no agreed transition period. The blue bars in Chart 3 plot what firms expect to happen to their own output and employment in that case.