The Brexit vote and the UK's post-2016 productivity slowdown

A 2019 Bank of England discussion paper, co-authored with Bank staff, concluded that much of the economic effect of the June 2016 Brexit referendum result is best understood as 'news' that arrived immediately about a future slowdown in productivity growth concentrated in tradable sectors, rather than a shock that built up gradually as actual trade disruption occurred. Bank research and its Decision Maker Panel survey found that more than half of UK firms ranked Brexit-related uncertainty among their top three sources of concern, with that uncertainty depressing business investment for several consecutive quarters rather than any single trade barrier. Annual UK GDP growth slowed to around 1.4% in 2018, its weakest pace since 2012, and in speeches that year Bank officials including Chief Economist Andy Haldane and external Monetary Policy Committee member Silvana Tenreyro explored how the referendum compounded a productivity puzzle that had already weighed on the UK economy since the 2008 financial crisis. The Bank's analysis treated investment hesitancy, not a single cliff-edge event, as the primary transmission channel through which the Brexit decision slowed measured economic growth in the years immediately following the vote.