The first is that since the referendum there has already been a material hit to the supply side of the economy in the form of a reduction in Total Factor Productivity (TFP), which is the efficiency with which companies put their labour and capital inputs to use. This would reduce output per worker, and hence real wages. It would also reduce future profitability, thus deterring investment. A reduction in TFP would have a lasting effect on productivity and hence the supply side of the economy, reducing the rate at which it can grow without generating above-target inflation. Like most economists I expect Brexit to have a negative impact on TFP for a variety of reasons, including the need to reallocate resources toward supplying new customers or new products, and the general effect of  6  All speeches are available online at www.bankofengland.co.uk/speeches  6  2  reduced openness . But these are effects that, like the effects of capital deepening on productivity, will tend to either build over the long run or only really take hold after our trading arrangements have changed. So, while they can be expected to have a material impact on productivity by the end of the MPC’s forecast horizon, I’m not convinced they can fully account for the additional weakness in productivity we have already seen. It shrank by 0.2% in the year following the referendum compared to growth of 0.5% on average in the preceding seven years.
I also have a direct set of prescribed responsibilities under the Bank’s application to itself of the Senior Managers Regime – a framework developed to improve accountability at the top of financial services firms. As a key part of that accountability, over the coming years I look forward to giving many talks and speeches such as this one to set out the thinking behind decisions and their delivery across the full range of my and the Bank’s responsibilities. The Bank has quite rightly placed emphasis on the role of communication as a policy tool in its Vision 2020 strategy; describing our work to as diverse a range of people as possible. Of course I start this new role at an interesting point in time. It is nearly 17 months since the UK voted to leave the EU, and just over 16 months until that decision takes effect in March 2019. In the period since the referendum we have learned that while Brexit was at one level a binary decision, there are many potential outcomes, and paths to those outcomes. Perhaps reflecting this multidimensionality, uncertainty about Brexit seems to be increasing rather than diminishing over time (Slide 1). In the Bank’s Decision Maker Panel Survey (which is run jointly with Nottingham University), the share of firms who placed Brexit among the top sources of uncertainty rose from 35% in a survey taken in September 2016 to 40% in August this year.