The Decision Maker Panel
The Decision Maker Panel Survey Opens in a new window was established in August 2016 and is run by the Bank of England in partnership with the University of Nottingham and King’s College London. It was also developed in collaboration with Professor Nicholas Bloom from Stanford University and is supported by funding from the Economic and Social Research Council. The survey was set up to collect detailed and timely information on the economic conditions facing businesses and on their expectations. Its aim was to inform policymakers at the Bank of England and create opportunities for innovative high-quality research.
The DMP covers a representative sample of firms with 10 or more employees across all sectors of the economy. Since 2022 it has received, on average, 2,500 monthly responses. Individual responses are anonymised to protect confidentiality. The survey asks firms about recent developments and year-ahead expectations for their sales, employment, investment, and output prices. For expectations, firms are asked to estimate growth under five distinct scenarios and assign probabilities to each scenario. This makes it possible to calculate the average expectation, but also uncertainty and skewness of expectations at the firm level. Measuring firm-level uncertainty in this way is an important methodological contribution of the DMP. In addition, the survey also includes special questions on topical issues such as the impact of the war in Ukraine Opens in a new window, climate-related investment, and firm profitability Opens in a new window. Further information on the survey and how the data can be accessed is detailed in a recent methodology paper.
Early waves of the survey emphasised Brexit uncertainty
The first survey wave of the DMP was distributed less than three months after the UK voted to leave the European Union (EU) in June 2016. Data from the survey show that this vote created an unexpected, large, and persistent uncertainty shock. In the first two years of the survey, the outcome of the Brexit referendum was consistently a top three source of uncertainty Opens in a new window for around 40% of businesses (Chart 1). Firms reported that Brexit uncertainty increased further over the second half of 2018 and in 2019, as different future trading arrangements with the EU were discussed and debated, before starting to decline in 2020 Opens in a new window after the UK formally left the EU.
Chart 1: Brexit uncertainty
Footnotes
- Sources: Betting data for pre-referendum period and DMP Survey.
Higher uncertainty can impact firm investment decisions. Past research using DMP data found that UK investment was 11% lower Opens in a new window due to Brexit, including a strong anticipation effect by firms. It also found a negative effect on UK productivity, at least partly due to diverted management time to prepare for the transition.
A key source of high-frequency data during the Covid-19 pandemic
In March 2020, the first national lockdown was announced in response to the Covid-19 pandemic. Beyond the health effects, the pandemic caused a significant economic shock to firms. The DMP was a key source of real-time high-frequency data, with the first questions Opens in a new window about the impact of the pandemic being asked in March 2020. The results revealed a large negative effect on firm sales and investment, both dropping by more than 30% in 2020 Q2 (Chart 2). Employment also contracted, but by relatively less, largely due to support from the government furlough scheme Opens in a new window.
In addition to the immediate direct effects on firms, the pandemic also caused a sharp rise in uncertainty Opens in a new window across a number of measures. In April 2020, 97% of respondents in the DMP cited Covid-19 as a top three source of uncertainty for their business. Firm-level measures of sales and employment uncertainty also jumped sharply in 2020 (Chart 3). Relative to average 2019 levels, sales uncertainty increased by 80% and employment uncertainty by over 60%. In the early stages of the pandemic, expectations for employment were also skewed to the downside, suggesting firms thought there was an increased risk of negative outcomes.
Chart 2: Estimated impact of Covid-19 on firm sales, employment, and investment
Footnotes
- Source: DMP Survey.
Chart 3: Measures of firm-level subjective uncertainty
Footnotes
- Source: DMP Survey.
The impact of the pandemic varied significantly Opens in a new window for firms in different industries. Firms in sectors which relied on face-to-face contact (eg accommodation and food) experienced the largest contraction in sales. The uneven nature of the pandemic shock also had an effect on productivity Opens in a new window, with declines in ‘within-firm’ productivity and offsetting increases in ‘between-firm’ productivity, as lower productivity firms experienced larger contractions. DMP data show that by mid-2022, the main effects of the pandemic on firm performance had mostly unwound (Chart 2). But the pandemic has had at least one longer-term effect. In 2023, managers reported a significant increase in hybrid and fully remote work Opens in a new window since 2018, and they expected these patterns to persist over the medium term.
Tracking firm price and wage growth and expectations
Starting in mid-2021, CPI inflation started to increase, and reached a peak in October 2022. The DMP provides a measure of firm own-price growth, which covers prices across the economy, but is nevertheless highly correlated with trends in CPI inflation (Chart 4). Furthermore, DMP data allowed us to study the drivers of price inflation by comparing firms who were exposed in different ways. Our research Opens in a new window showed that the main drivers of inflation in 2022 were labour shortages, supply disruptions, and energy input costs. Recent work Opens in a new window also finds that firm prices are much more responsive to positive demand and cost shocks than negative shocks.
Chart 4: Annual CPI inflation, DMP annual own-price growth and year-ahead expectations
Footnotes
- Sources: DMP Survey and ONS.
In 2024, the large external shocks on the economy have receded and inflation rates have fallen from their peaks. A key question at this juncture is how to best ensure that inflation will remain sustainably at target over the policy horizon. On this, firm expectations from the DMP are one useful metric to monitor.
In the latest data, firms expect their prices to grow by 3.7% over the year to November 2025 (purple diamond, Chart 4), down from 3.9% in the year to November 2024. These numbers are based on three-month moving averages. But there are differences across firms. Goods providers have experienced a faster disinflation over the past 18 months and expect year-ahead price growth close to their pre-pandemic averages (orange diamond, Chart 5). Meanwhile, price growth among services providers has declined more slowly and expectations remain above earlier averages (aqua diamond, Chart 5).
Chart 5: Firm annual and expected price growth
Footnotes
- Source: DMP Survey.
Chart 6: Firm annual and expected wage growth
Footnotes
- Source: DMP Survey.
Wage growth is a particularly important influence on price-setting in the service sector. Since May 2022, the DMP has also asked firms about wages. Chart 6 shows that wage growth has declined markedly in 2024 for the goods sector and among firms in business-facing services (eg finance and insurance). These firms also expect wage growth to decline to below 4% over the year ahead. Meanwhile, consumer-facing services (eg recreational services) have experienced stronger wage growth over the past year and expect higher wage growth of around 4.9% in the year to November 2025. The DMP provides a valuable way of monitoring the outlook for prices and wage growth, both on an aggregate level as well as for specific sectors of the economy.
Higher interest rates since 2021 have lowered firm investment, sales, and employment
The recent high-inflation episode was accompanied by a significant monetary policy tightening. Firms in the DMP reported that the average interest rate on their borrowing (both bank and market-based) increased from 3.6% in 2021 to 6.9% in the three months to November 2024 (Chart 7). Firms expect some easing over the year ahead, with the interest rate on their borrowing expected to fall to 6.1%.
In special questions added to the survey, firms estimated that higher interest rates had lowered their investment, sales, and employment in 2023 Q3 (Chart 8). The results Opens in a new window implied that there were direct impacts via firms’ cost of capital, but also more indirect effects via weaker demand. Firms were also asked about the impact of higher interest rates on their required return for undertaking projects. This is known as the hurdle rate. Evidence from the DMP suggests that hurdle rates have increased Opens in a new window since 2018 as monetary policy has tightened, but only slowly and by less than policy rates. Monitoring the impact of interest rates on firm performance continues to be a key topic for the survey, including assessing the impact of any reductions in official rates.
Chart 7: Average interest rate on borrowing and interest rate expectations
Footnotes
- Source: DMP Survey.
Chart 8: Estimated impact of higher interest rates in 2023 Q3
Footnotes
- Source: DMP Survey.
Conclusion
Since it was established in 2016, over 14,000 firms have participated in the DMP Survey. We continue to use the survey to bring high-frequency quantitative evidence on firm performance and expectations to the Bank’s MPC and to contribute to high-quality academic research.
This post was prepared with the help of Philip Bunn, Jessica Henley, Sami Khan, Craig Menzies, Krishan Shah and Ivan Yotzov from the Bank of England’s Structural Economics Division, alongside Nicholas Bloom from Stanford University, Paul Mizen from King’s College London, and Gregory Thwaites from the University of Nottingham.
Share your thoughts with us at BankOverground@bankofengland.co.uk