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Impact

We care about our research not only for the scientific impacts that it has but also for the way that it can influence policy and decisions of policy makers and for how it interests the public and improves their understanding of the way that the world works. Below are just some of the examples of where our research has had a real impact on policy.

Featured research impact summary

Understanding the impact of Brexit uncertainty on UK firms

The issue

newspaperLeaving the EU and the terms under which we leave could present a substantial shock to business conditions that affects decisions over investment, employment, location, exporting and importing through supply chains. It is one of the most consequential policy decisions in the post war period.

From the outset it was understood that policymakers including the Bank of England, HM Treasury and BEIS would need new tools to evaluate the business and economic environment, in order to consider their policy options, such as when/whether to adjust interest rates, taxes and allowances, and implement industrial strategies.

The research

The Decision Maker Panel (DMP) – a collaboration between Paul Mizen, University of Nottingham; Nick Bloom, Stanford University; and the Bank of England is a monthly online survey of more than 8,000 UK companies. It provides detailed firm-level data available by region, industry and by firm size to measure UK investment, productivity, sales, employment and uncertainty to inform policy responses by the Bank and the UK government (HM Treasury and BEIS). It has received more than £1m in funding from the Economic and Social Research Council since its inception in July 2016.

Paul and Nick instigated the project because the Bank of England lacked comprehensive business data to help it make monetary policy decisions under uncertainty. Business insight was too often based on small, unrepresentative samples of data, while official statistics were only available with a significant lag. DMP innovated by providing detailed surveys – original to the UK – that capture business executives' expectations and uncertainty.

These surveys became critical to policymaking as they:

  • significantly transformed how the Bank conceptualises the type of uncertainty that the UK is experiencing due to Brexit
  • identified Brexit as a major source of uncertainty for firms, with most firms expecting a negative impact of Brexit on sales, investment and higher costs
  • revealed that Brexit uncertainty lowers growth in Britain's most productive firms

The impact

  • The intelligence quickly established reliability and is being used by official data analysts at the Bank of England to coordinate with their surveys and help them better gauge the state of UK business. The collective results have been reported in Agents' Summary of Business Conditions since Sept 2017, and in Bank of England statistics.
  • It transformed insight for the Bank’s Monetary Policy Committee, who have requested vital information from DMP on uncertainty, employment, investment and productivity for policy meetings and evidence to Parliament.
  • The DMP has facilitated communication of emerging policy challenges (Brexit) through speeches by Governor Mark Carney (July 2017, July 2019, Jan 2020), Deputy Governor Dave Ramsden (November 2017, June 2018), Deputy Governor Ben Broadbent (Oct 2016, May 2019) and Chief Economist Andy Haldane (November 2017, July 2019); It explained policy decisions in press conferences and official publications, for example, Inflation Reports, Agents' Briefings.
  • In June 2018, DMP research contributed to an HM Treasury-BEIS British Productivity Review seeking evidence on drivers of UK productivity to better understand policy interventions to improve UK output per head.
  • The Bank extensively referenced DMP in verbal and written evidence to the Parliamentary Inquiry into the Brexit Withdrawal Agreement (December 2018), quantifying the likely effects of Brexit uncertainty on the UK economy using DMP data. The report indicates how the DMP provides intelligence on Brexit preparations, and shows how DMP information on uncertainty was used to update the Bank's investment model to draw conclusions about slower investment growth. For example, in the Monetary Policy Committee’s meeting mins (Aug 2019), the DMP was discussed extensively with 16 mentions of the DMP results influencing business productivity, investment and stock-building decisions. In November 2019, it was featured in the new format Bank of England Monetary Policy Report, showing uncertainty about future outcomes is an important driver of economic behaviour.
  • DMP evidence persuaded the Chancellor of the Exchequer to raise the Annual Investment Allowance fivefold to £1 million from 1 January 2019 to 31 December 2020, in a policy measure designed to offset uncertainty due to Brexit.
 

Research impact summaries

Modelling, mistakes and the search for “truth”

Modelling, mistakes and the search for "truth"

Research by the Centre for Finance, Credit and Macroeconomics (CFCM) has helped show how macroeconomic models can help with forecasting and real-time policy analysis. In this Q&A Professor Kevin Lee explains how economic models have evolved in recent decades - and how the far-reaching value of "number-crunching" has earned greater appreciation in the wake of the global financial crisis.

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Lending rates: have banks been behaving badly?

Lending rates: have banks been behaving badly?

Research by the Centre for Finance, Credit and Macroeconomics (CFCM) has helped shed new light on how banks set their lending rates for households and firms. The insights resulting from this work are proving especially valuable amid claims that rates have been kept higher than necessary in the wake of the financial crisis.

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Improving monetary policy

Improving monetary policy

Research by the Centre for Finance, Credit and Macroeconomics (CFCM) has helped improve the design and implementation of central banks' monetary policies, including those of the Bank of England and the European Central Bank.

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Financial stability

Financial stability: where macroprudential and monetary policies meet

The Centre for Finance, Credit and Macroeconomics (CFCM) is helping to inform long-term policy making by disentangling the complex relationships between macroprudential policy and monetary interventions. Dr Margarita Rubio explains how this has worked to benefit policy making in developed and low-income countries alike.

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Financial protection: reforming the "villains of recession Britain"

Financial protection: reforming the "villains of recession Britain"

In tandem with his study for the Financial Conduct Authority, Dr Gathergood produced an influential report for ResPublica, a leading economic, social and cultural think-tank. He argued for the credit industry as a whole to remove the barriers to consumers searching for the best products available and recommended that all lenders, from payday to mainstream, move to a model in which clients struggling to repay their debts would be automatically referred to free and independent advice.

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Macroeconomics, forecasting and real-time policy analysis

Macroeconomics, forecasting and real-time policy analysis

Macroeconomic models have an important role to play in helping decision-makers understand business cycles and recessions. Research by the Centre for Finance, Credit and Macroeconomics (CFCM) has helped demonstrate how such models can help with forecasting and real-time policy analysis by presenting the likelihood of the entire range of possible outcomes.

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Bringing the real world to policy decisions

Bringing the real world to policy decisions

The Centre for Decision Research and Experimental Economics (CeDEx) has helped government departments to devise and implement policies that better reflect the complexity and nuances of real-world behaviour.

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Disability in the developing world

Disability in the developing world: tackling marginalisation

Studies by the Centre for Research on Economic Development and International Trade (CREDIT) have provided governments in the developing world with valuable insights into the wider benefits of improving the lives of people with disabilities – from the economic gains to the broader impact on individuals, their families and the communities in which they live.

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Driving trade policy reform in Africa

Driving trade policy reform in Africa

Studies by the Centre for Research on Economic Development and International Trade (CREDIT) have reshaped trade in Africa and informed the policy guidance provided by international agencies.

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Helping UK exporters

Helping UK exporters

Research by the Globalisation and Economic Policy Centre (GEP) has helped shape the UK's export policies by providing a better understanding of why firms choose to export and the barriers they face.

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