Robert Peston (3:57)

Just also talk me through the other approach that you took, because you didn't just do the top down. Tell us about the bottom up.

Nick Bloom (4:03)

Yes, exactly. So the bottom up was actually much more work. So the bottom up with something called the Decision Maker Panel we actually created in 2016, we've been surveying about 5,000 British firms on a very regular basis for the last 10 years. And we know how exposed they are to the European Union. So their sales to the eu, their imports from the eu, their regulatory coverage, how many EU migrants they have, are they EU owned, et cetera. And so what you can do is you can compare EU exposed firms to non EU exposed firms and look at the impact on growth. And again, a kind of similar story before the referendum. If you're a firm that's exposed to the eu, say you have a lot of trade with them and you employ some migrants, your growth rate is pretty similar to a more domestic firm. And then after the referendum happens, this gap starts to open up. And by 2025, which is the most recent data we have, because accounts take about a year to come in, you see the gap is about 6%. So the bottom up number tells you that there's about a 6% loss from Brexit for the UK now, 10 years later, basically, and the top down gives you 8%, and that's our 6 to 8% range.

Robert Peston (5:15)

And so, just so that people understand the sums of money, we are talking about sums of money that could have contribute higher wages, could have contributed to A lot more money for the NHS through the taxation system for schools. I mean, my rough and ready calculation is on a 3 trillion pound economy, we're looking at 240 billion of income that has disappeared. Is that right?

Nick Bloom (5:45)

Totally right. I mean, this is an enormous loss of money. So just to give you a sense, you know, I can hear, I'm British, I live in the US now, but my dad and both my sisters work in the NHS. The expenditure on the NHS is about 8% of GDP. So it's like we could have doubled the money on the NHS if we'd not left European Union. And so I remember that battle bus claiming more money for the nhs. That was completely wrong. As it happens, NHS is facing a funding crisis and Brexit is a big factor. More money for defense, to give you another way to look at it, is about 2,000 pounds a year per person in Britain. That is we've lost because of leaving the European Union.

Robert Peston (6:26)

I think we're now going to go to a quick break and after the break I want to ask you, if we had had a more orderly Brexit, would it have been less damaging? And then secondly, the other question I'm going to ask you is basically having lost this 8%, how much of it could we get back if we rejoined, would there be a catch up if we rejoined the eu? So let's come to those in just a couple of minutes after a quick break.

Nick Bloom (6:51)

Foreign. This episode is brought to you by Octopus Energy. Now, you know we love talking to entrepreneurs on this show. So with us is the founder of Octopus Energy, Greg Jackson. Right, I'm going to start with this. If you could change one thing to help Britain's economy grow, what would it be? I'd love to see pension funds putting more money into British businesses. Over the last 25 years, they've fallen from 40% of their investments going to British businesses to 4%. That's bad for business here, it's bad for our stock market, but it's also bad for pensioners. In fact, a Canadian pensioner will get almost double the pension from the same amount invested as a British pensioner. We need to sort that. Nice one, Greg. Well, thanks to Octopus Energy for powering this episode of the Rest is money.

Robert Peston (7:42)

So good, so good, so good.

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Robert Peston (8:40)

There are actually some pretty common sense explanations for why there would have been this effect, and I want to talk to you about those in a minute, but I think it is important to acknowledge that economists, particularly those economists who supported Brexit, some of them have said some quite unkind things about you. But there has been some criticism. And I suppose there's one bit of criticism that seems to me to, from the point of view of, how can I put it, sort of common sense to use that phrase. Again, I think it's important to examine, which is there was a bloke called Julian Jessup who said this. He said basically, if we had grown 8% faster than we actually did, that would have meant that we would have been, along with the us, the top performing rich economy in the entire world. And he takes the view that, although I'm sure he's a great patriot, that it is completely inconceivable that Britain could have been an economy performing as well as, let's say, the US over that period. What do you say to those who, in a sense say whether we'd stayed in the EU or left this idea that staying in could have turned us into this sort of unbelievably dynamic place. What's your response?

Nick Bloom (10:10)

I don't think he actually read the paper. You know, his maths. If I would just explain his maths is just completely wrong. Even GCSE maths would show that can't be true. So just to be clear, Britain is 8% below the average of the other 33 countries since 2016. So if you added 8% to us, we would be at the average of the other 33 countries. So that means it would be impossible for us to be the top if we're at the average.

Robert Peston (10:38)

But then let's look at the other thing that he says. And I think you have acknowledged, because you looked actually you did all sorts of different methodologies top down, you looked at all sorts and you did, I think, in the end, acknowledge that the thing that he Also got upset about was you had a so called synthetic basket and then you had various other baskets that you were comparing with. And I think you have acknowledged that the synthetic basket you're quite happy to ditch because the other ones still prove your point. So tell me, is that right?

Nick Bloom (11:06)

Yeah, exactly. So just in kind of layman's terms, we have 33 other countries to compare Britain against. So what would you do? So one version, which is our main version, you take the average of all of the other 33, that seems probably the fairest and that's what we do. But there are a number of other versions. Another is called GDP weight. You put more weight on the big ones, you could do distance weight, more weight on the nearby ones. There's another version which is called synthetic, which you put more weight on the countries that look most like Britain before Brexit. And it turns out that before Brexit, for the 10 years before Brexit, Britain was actually doing pretty well. And so it's growing pretty fast. So under the synthetic version you match us to other fast growing countries of which one of them is the us. Now that's only one of five or six versions we do. That's not even our main version. But yes, he picked on it. But you know, if, if you're trying to score political points, you pick on some weird outlier thing and complain about it, but that's, that's not where 8% number comes from. So I'd say, to be honest, that's kind of irrelevant to the conversation in

Robert Peston (12:09)

just a minute because people will want to know this. Let's talk about why in practice leaving the eu, you know, would have did lead to Britain becoming poorer than it would otherwise have been. But I must just talk to you a little bit about the politics because from as I understand it, this was a bit of work that you couldn't necessarily publish, I think. Was it because some of the people that you were collaborating with worked at the bank of England? What was the reason why there was some issue around the timing of publication?

Nick Bloom (12:48)

Yes, exactly. And just to say, by the way, if you want to take an independent view, something like the imf, I'm aware that everyone has their position on Brexit. The IMF kind of stands back and is the, in a sense, global referee. Their numbers, in fact, Geeta Gopinath, who is the deputy head of the IMF and chief economist now quotes our numbers. So I wouldn't say there's anything particularly extreme about our numbers. They become the normalized numbers that most people are using. So why couldn't we get that out earlier? As you know, Robert, much better than me, the politics around this is sensitive. Some of my co authors at the bank of England, and so we just didn't feel we should be publishing numbers on Brexit in the kind of recent period after the vote, because it was still politically sensitive in 2025, it just became orthodoxy in the kind of mainstream view that, look, Brexit has clearly been damaging. I don't think at this point anyone disputes it. I mean, even the markets, just to be clear, the day of the vote, the day after the vote, and it became clear Britain was leaving the European Union, the pound dropped about 15% because markets were aware this was pretty devastating for the economy. So it just took a while for us to be able to get it out, for people to kind of stand back and say, look, let's move along from the politics, let's look at the real impact. And at that point we could get the figures up.

Robert Peston (14:03)

You know, let's be clear, it is now infusing political debate because it is now the number the government uses. And for years, and many would say this is because they were frightened of making the case for getting close to the eu, that they ran away from the whole debate about essentially how much we'd been damaged by Brexit. So I do think it is significant. It was quite striking to me when the Chancellor, I think it was earlier this year, started using your 8% number.

Nick Bloom (14:40)

Yeah, I mean, there are some things for political reasons get hidden. For example, in the us, the current government doesn't want to talk about climate change. It's pretty clear that climate change, but they're not talking about it in the same way. In the UK For a while, it was difficult for the government to talk about the damage of Brexit at this point in 2016, it's just so obvious and so clear.

Robert Peston (15:00)

What I'd like to do is now to unpick what the transmission mechanism was from that vote to leave the eu and the fact that we got poorer. I mean, you know, I remember at the time, or rather in the run up to the vote, there was quite an important piece of research that the bank of England did. And what that said was simply by dint of the cost of access to the world's biggest market going up, you know, the cost of access to that market going up, the cost of trade with that market going up, there would inevitably be less investment by firms. And that would make us. That would be one of the mechanisms that would make us as poorer. Is that something, is that part of what has come to pass?

Nick Bloom (15:53)

Totally. So there's two blocks and they're both about the same size. So one block of damage, that's 3 to 4% is exactly what you're talking about, which is it's just harder to trade. So you know, there's tariff and non tariff barriers. The rules and regulations keep changing. You know, it's more, it's complicated. So imagine you're a, you know, a store. Imagine you're Sainsbury's and rather than being on the high street, you decide to set yourself up two miles down a long narrow path. Not surprisingly, sales goes down because it's harder to get in and out of the store. So that's like fact one is it's just harder to trade with the rest of Europe and that's 3 to 4%. And that was totally predictable. And there's in fact we look in the paper, there are 25 forecasts made in advance of Brexit and 22 of them that weren't by advocacy groups predict this. It's like it's Econ 101. The other half that I think was less predictable, but it's turned out to be a big deal, is the chaos, uncertainty and confusion of the process, including going through six prime ministers, one lettuce. You know, everything as you know. And that looks like it's added an extra 3 to 4%. In the paper we actually unpick some of this. We measure uncertainty. In fact, some of the most revealing stuff is the amount of time that CEO, CFO said they spent on Brexit. It was hours. I was going to ask you about

Robert Peston (17:09)

that because you've got this amazing survey that you do of thousands of companies, I think, and I think you say it represents something like 10% of the private sector, is that right? This is a very big, it's a very big and therefore reliable survey. And one of the things I did find shocking was just, and talk us through. There's just a sheer number of hours that chief financial officers and other senior executives were spending on just adapting to this new trading world.

Nick Bloom (17:35)

Yeah. And they were giving us numbers of about two hours a week on average for the three years that we were collecting that data. That is a huge amount of time. Imagine instead you took that time and said, we're going to spend two hours a week improving it, maybe adopting better technology, training, doing strategy. You're going to see these firms grow a lot faster. And instead it's taken out and it's dealt on paperwork. There's also a lot of stockpiling. So you see these photos of tens of thousands of lorries stuck at Dover. But that affected firms because they had to hold more stock. There was a bunch of companies would complain about things like, I'm trying to import, export, flowers. This stuff died at the ports because it sat there so long. So there was two blocks. They're both 3 to 4%. One was like classic, if you just make it harder to do business, businesses do less. Well, think of it as just taxing trade and the other half is just chaos, uncertainty. The second half didn't need to happen. But the problem was, and I remember this, at the time when they voted on Brexit, there was not really a clear plan of what Brexit was in the next six, seven years, was fighting over what that plan was. And that made the effect much more damaging.

Robert Peston (18:42)

As a political editor, which I have been for the past few years, living through those years, after we voted to leave the EU and before we had the most basic trading agreement put in place by Boris Johnson when he became Prime Minister, which we came into effect at the beginning of 2020 or the end of 2019, the run up to that. I've never known chaos in Parliament like it. Theresa may have one plan and then another plan, and a party was split and there were all sorts of votes, various different bits of what she wanted to do that the MPs constantly threw out. We had the chaos of Boris Johnson trying to send MPs home, apparently in the process of misleading the Queen at the time, Honestly, it was, you know, it was parliamentary chaos like none I've ever experienced. So, of course, if you were a business trying to work out at the time what kind of relationship was we would have with the EU was impossible, because none of us knew. Do you think that if essentially, David Cameron, before he'd organized the Brexit vote, had actually put in place any contingency planning for what Brexit might look like, actually, the cost of Brexit might have

Nick Bloom (20:20)

been reduced a bit massively. I mean, our estimates are roughly halved. So, look, if in 2016, there'd been a vote and there was Remain and then Leave had an actual clear plan, these are the eight steps. These are the, you know, we're going to do it over the next three years is the transition phase, and the day after we'd voted and voted to Leave, they'd start to execute that carefully, methodically, predictably, yeah. It had probably seen 3,4% loss of GDP. But it wouldn't, you know, be nearly as bad as it has been. You know, what are the kind of things we see in the data? Investment dropped far more. There was a collapse in British investment. It's so incredible. If you look at the charts, British investment was surging ahead for 10, 15 years up to 2016. And it just moves sideways. And every other country shoots up investment in R and D patents, they drop back training. All of this stuff is held back as companies are like, what on earth's going on? I mean, look, if turn it around. If you're running a business, imagine you're running a business. You've got to import and export to Europe or you're using migrants and suddenly you've no idea whether that's going to continue or not. You think, well, I'm just keep the money in the bank, I'm not going to invest. It's too risky. I could be left in the wrong place. And now I've got to deal with a ton of paperwork to fit, you know, in the meantime. And so of course, yes, that that basically doubled the damage was the chaos over the next six or seven years after the vote. Trading at Schwab is now powered by Ameritrade, bringing you an expanding library of education with even more ways to sharpen your trading skills. Skills access new online courses, insightful webcasts, articles, engaging videos and more, all curated just for traders. Plus guided learning paths with content designed to fit your unique interests. No sifting to find exactly what you need so you can spend your time learning to trade brilliantly. Learn more@schwab.com trading when you need to

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Robert Peston (23:43)

The milk has been spilled, as it were. We had a chaotic exit. We are out of the European Union. You know, 8% of GDP has been lost according to your projections. So what do we do now as a nation? So we've got a government that right at this particular juncture is, is saying if it can, if it, I mean, it's not at all clear it'll be able to persuade the EU to do this, but its current approach is sector by sector. Look at a particular sector, look at whether the businesses in that sector are saying that if we aligned our rules with the EU's rules, followed the rules set by Brussels, if the businesses there are saying, yeah, we want to be a rule taker in that space, the government will then try and negotiate, as it were, the equivalent of single market access just for that sector. But then there are of course lots of other whether they're MPs or pundits or even members of the government. And if it's members of the government, they have to say this privately who are just saying, actually it's completely clear that we should simply rejoin the single market, rejoin the customs union. And the most effective way to do that, rather than doing a sort of Norway deal or a sort of rather complicated Swiss kind of deal, we should just rejoin the eu. I just wondered, if you look at what the data that you analyze tells you, does it reveal anything about whether the rational thing to do is just to go the whole hog of rejoining the eu, or is there method in the government's attempt at least? I mean, I have to say I think there's a very good chance Brussels will just tell the government to hop off because you know, they've always said they don't like cherry picking when it comes to access to the single market. And what the government is apparently trying to do is cherry picking. But if the EU were prepared to pay ball on cherry picking, is that. Is that a perfectly reasonable approach?

Nick Bloom (25:56)

I think there's two ways forward. One is to say, you know, look, we've had chaos for the last eight, nine, ten years. There isn't enough political will reform. Who currently head of the polls, would reverse anything we did. So the last thing we want to do is generate more uncertainty. Let's quietly and gradually try and align ourselves the European Union, but we can't go back in. So that will be the kind of safe, boring bet, but that at least reduces the amount of turmoil. The other is just to say, look, we made a mistake, we should never have left the European Union. It was clearly a mistake. Everyone agrees at this point, let's just reverse it. You're right that one of the problems is will the EU let us back in? It's a bit like a prison gang. You know, in prison gangs, if a member leaves, they give them a beating to make sure that no other member leaves. After that, you know, often in these vicious gangs, they kill people that leave. So the European Union I don't think is going to kill us, but, you know, it has still 27 other members. It doesn't want any of the rest of them leaving. So it's not clear it's going to roll out the red carpet to Britain. So, Rob, it's kind of like your question politically. I think economically, as an economist, it's very obvious that rejoining would be good. I think the issue is politically, can we, A, make that happen and B, make it stick? Because rejoining and then leaving again, if reform got in would be even worse than, you know, as we're workers, we'd have two extra decisions and chaos for another five, 10 years.

Robert Peston (27:18)

I mean, look, I'm going to now do my little monologue about why the politics for the Labour Party probably mean that actually whoever's leader at the next election, and it's by no means clear, that will be Keir Starmer. Let's, for argument's sake, pick just a name out of the air. Let's say possibly Andy Burnham. Right, so you've got this situation where an election is coming. The economics, as you say, of rejoining for this government are actually pretty straightforward because broadly, if they announced an intention to rejoin and the markets believed it might happen, I mean, truthfully, you would, I think, get a bit of a surge into people buying sterling assets. I think the pound would rise, I think interest rates would Fall, you know, money might well flow into private investment as well. People would have to believe it was sustainable. And the reason it might be sustainable is because right now, Labour's share of the vote is utterly fragmenting. You know, the Greens are getting a chunk. You know, obviously Lib Dems. Actually, the Lib Dems share rose before the last election, hasn't rose massively since then. But, but the. But the left, the left, the centre left vote has massively fragmented, which is one of the reasons why you talk about the potential for reform to win the next election. When I talk to those at the top of the Labour Party, they can think of no other way to reunite the left than to make the next election effectively the equivalent of a referendum to go back in. I mean, the argument would be we don't have to have another referendum, but Labour would run on the promise that if the British people voted to rejoin, that is what they would then negotiate. And they are about the only circumstances that many people can think of which would persuade people who are currently thinking of voting Green to vote Labour again. So you can sort of see the political logic of why Labour might end up in that position, which is one of the reasons I asked you whether or not actually economically it would be a good thing. Because actually, I think where I sit right now, I think it is pretty likely, given that Labour doesn't have a credible growth plan and doesn't have a plan to get the left back together, as it were, focused on essentially votes for Labor. It doesn't have. Have a way of marginalizing the Greens and the Lib Dems and even the SNP in Scotland or Plaid Cymru in Wales. This would be a way potentially of rebuilding their popularity.

Nick Bloom (30:10)

No, you're right. I mean, just to highlight, build on something you said initially as well. It would generate positive surge in sterling, interest rates would go down, inflation would go down, the market would like it. I mean, in general it would. Economically it's a very positive thing. So that would create a bit of a honeymoon. And I mean, the other thought I have certainly folks have talked to me about is it's kind of like a roll of the dice. Look, if your starmer and things are, you know, looking grim and you're on the way out, you may think, let's just flip one final card and that flipping that card is saying we're going to, you know, go back in. And as you say, you know, it could work out well, particularly if you have an economic boom and people believed it. The other thing I should say that's kind of interesting is Trump is playing a big role in this for two reasons. One is obviously Trump has made being out of the European Union much less appealing because he's giving Britain the cold shoulder. Because always the Brexiteers plan was, hey, we'll leave Europe and we'll go, you know, hang out with our buddies, the Americans. And now we've got Trump in power, is saying, you know, you're not our buddies anymore. And the other thing is Trump is doing his own kind of, I was about to say mini, but more like maxi Brexit in the US in the sense that he's making it harder to trade, he's being anti immigrant and he's creating a lot of uncertainty. So it's interesting living in the US in 2026, 10 years after Brexit, Trump's kind of launching into a similar process there and I think you're going to see a similar death by a thousand cuts if it continues. But in the US it's more reversible because if Trump gets out of power, the next president could reverse what he's done.

Robert Peston (31:38)

I suppose there's another issue which I'm always, I don't know what we do about this, but one of the things that's always slightly shock me is how politicians do not understand big numbers in the sense or rather relative numbers. So the excitement with which politicians will announce, for example, a trade deal with India that I think on the government's own figures, in 10 years time, I think it's likely to increase GDP by 0.51 of a percentage point compared to the 8% we've lost from Brexit. And yet when you talk to ministers, we say, oh, it's all very dangerous. We join the EU because we wouldn't have the scope to negotiate these trade deals with countries like India. I mean, the problem is, however much we might love a trade deal with India, it just can't have. It can't make up for the loss of our trade with, you know, a continent. Well, you know, a continent we're on, it's very close to us and an enormous seamless market.

Nick Bloom (32:50)

Yeah, totally. I mean, the European Union is about half of British exports and imports and the other half the rest of the world. And India is probably, I know, 1 2%. Yeah, totally. I completely agree. I mean, it's kind of Econ 101, I think.

Robert Peston (33:02)

You worked at the treasury briefly, didn't you? Were you surprised by how sort of, in a sense innumerate so many bloody politicians?

Nick Bloom (33:09)

Are you Know, it's. The politicians I dealt with were pretty smart and on top of it, it was more the politics. So the issue of Brexit, I think is, look, yeah, there's that. I love that Michael Gove comment about, you know, we've heard enough of the experts now. Let's listen to people that know nothing about what they're talking about. He. It turns out that the experts were totally right. That's the. That's the other part of our paper. We go back. There were 25 published forecasts published in writing in 2015 and 2016 before the vote. And these forecasts predict what would happen to the British economy if Brexit happened over the next up to 10 years. So we can go back now and

Robert Peston (33:45)

say, well, were they right?

Nick Bloom (33:46)

Were the experts right? And it turns out, yes, they're actually extremely accurate. So I wish we'd had listened to more of the experts. And he could have said, look, if you told the British electorate, hey, you know what, you can vote for Brexit, it's probably going to halve, you know, it's going to cost you £2,000 a year. But if you want to, you know, decide your own future, say, and you want less immigrants and you want. I don't. Cheaper housing because there's less people around, you can have it. The problem is that was never what was promised. There was promised more spending on the nhs, which basically turned out to be an absolute lie.

Robert Peston (34:17)

Well, I mean, I have to say, to blow my own trumpet, I did literally, during the referendum, say every single night on itv, every night on itv. I did say, if we leave the eu, we are going to be a lot poorer. You may want to leave the EU for other reasons. Precisely the reasons you're talking about, you know, allegedly control immigration. Of course, immigration actually rose after we left the eu, but, you know, in theory, we were supposed to be able to control immigration. And then secondly, you know, you might think somehow Parliament will have more powers then. Big question mark about whether Parliament subsequently use those powers particularly. Well, but anyway, I did. I mean, but the thing that, you know, I did, you know, in a sense, find shocking is I assumed that British, because it was, you know, it was, frankly, pretty basic economics, that leaving the EU was going to make us poorer, which is why I said it every single night on the television. I slightly assumed that the British people, in the end, this was something I learned from my dad, who was an economist. You know, he took the view people would never, you know, vote against what will vote for, what would make them Poorer and I think have always, you know, essentially done my job on the basis people won't vote for what makes them poorer. But this was an occasion where spectacularly, very large numbers of people, particularly poorer people, people on lower incomes in depressed areas, where they did vote to make themselves poorer, which was shocking.

Nick Bloom (35:44)

Yeah, I mean, it's hard to understand. You see that, by the way, you see something very similar in the US under Trump. So just to be clear, Trump's main revenue raising policy is tariffs. He's going to tax imports. Guess who ends up proportionately spending most of that? Poor people. Because if you're very low income, you're spending a lot of your money going to Walmart buying imported cheap goods, whereas if you're very rich, you don't do that and you spend it more on services. So the same thing, it's, you know, you, it's why politics does not equal economics. You know, the importance of this show, but the economics of the Brexit is very clear. It's, you know, it's made Britain's poorer, as you say, there may be reasons you support Brexit, but you should be up know in advance that it's probably a couple of thousand pounds a year. And I think that informs the debate about re entering. And I agree with you. I, you know, maybe it's a 50, 50. The current government decides to, particularly if things go bad, badly in terms of polling, they may decide to, you know, turn over that card and announce they're going to reenter the European Union if the, if the EU will let them. That's the big unknown is, well, you know, on the prisoner gang analogy, the EU may not want to let them back in with open arms because it's worried it will encourage other countries to try it out, leaving.

Robert Peston (36:52)

Although to be honest on that front, I do think actually the sort of geopolitics has shifted. It is so obviously in the interests of the whole of Europe for our military forces, our defence to be aligned. And the UK still has one of the more credible military capabilities in Europe. And that ought to be the idea of essentially convergence between our defence and Germany and France and the rest of Europe ought to be enough, in my view, for a rational EU to say there's a deal to be done commercially as well here. And that in general, just bringing the UK closer to the center, I think is in the European Union's interest. So I'm hoping that the punishment, beating instinct has now dissipated in favor of Putin is the real enemy and we've all got to stick Together. I mean, the other point which I thought was just interesting in all of this, of course, the cancer. The reason why you would argue, well, the reason I wrote a book about this called wtf, the reason so many people voted against their economic self interest was because the collapse, because of the collapse of trust in those who run this place. I mean, and you see the similar phenomenon with the rise of Trump. The problem was people in low income areas felt that over many years they'd been let down by the likes of Blair and Cameron and Osborne. And so when they heard Cameron and Osborne and Blair saying it's in your economic interest to stay in the eu, I'm afraid they did what Michael Gove was urging them to do. They basically didn't trust them and they didn't trust the experts like you, who were saying, actually these guys are right and somehow we've got to rebuild trust in politicians and indeed in experts. So we've had an absolutely fascinating conversation. There's one other thing I want to talk to you about. Just because it's something that comes up a lot on this podcast. We talk about a lot, which is the whole question of the competence of British management putting EU to one side. Actually, the UK did have a period in the run up to Brexit and certainly in the run up to the financial crisis where certainly and within Europe, the British economy performed relatively very well over a long period of time. We performed, for example, significantly better than Germany. You know, historically we regarded as the kind of competitor that was always going to do better than us. But you know, productivity has been depressingly low for 20 now years. You know, growth in general has been low, living standards have been suppressed. There is an argument that says that part of the problem is that those who run our companies, the quality of our managers is not as good, for example, as those in America. You have been running essentially a study of this for donkey's years. What would you say the data shows about the quality of British management?

Nick Bloom (40:11)

Yes. So we've, geez, going back now 20 years, been collecting management data across countries. You're right. Top of the pile is the us. I mean, I can use a Premier League analogy here, but you know, they're kind of like, what if you want Liverpool, Man City, Arsenal, whoever, you know, they, they repeatedly come top and it's maybe not surprising. They have a ton of top business schools. Most of the Fortune 500 sits in the US. It's a big country. Britain looks, you know, it's kind of, it's like, you know, fifth, sixth Seventh in the world. It's kind of like Aston Villa. It's fine. It's pretty good. It's not out of line with its GDP per capita, by the way. I mean, Britain is no longer, you know, British. Britain's about 20% poorer per head than the U.S. i think if you wanted to improve British management, the playbook's pretty clear. It's kind of why I use the Premier League analogy. You just make Britain more open. So look at the Premier League. It's the top league in the world by some margin. Why is it? It's because it's open. You have foreign owners and foreign managers and foreign players. And so, you know, you just leave it open. You let the best come. And so you would want to really do the same for British companies. You just. That's part of the issue with the, you know, the downside of Brexit made it harder for Europeans to buy British companies to work there. The more open we are, the more we say we want the best and the brightest here, the better our management's going to be and the richer will be as a country country.

Robert Peston (41:29)

And so that's also connected to this issue of, particularly with talent, making sure the visa system doesn't discourage them from coming. There's also something. There's also stuff to do with whether we are the kind of place which is resentful of people who earn a lot of money. And I think, you know, it's such a difficult balance there, you know, tackling inequality, which is plainly cancerous when it comes to the cohesion of us. You know, inequality is undoubtedly cancerous to the cohesion of a society and trust across society. But on the other hand, it's also the case that whether we like it or not, human nature is that talented people will go. You know, if you can earn three times as much somewhere, one place than another place, you're probably gonna go to the place where you can earn three times as much if you're talented. It's tricky, isn't it?

Nick Bloom (42:25)

Yeah, totally. I mean, you should kind of take a copy of the US Playbooks. I live in Silicon Valley. Stanford's in California, near San Francisco. And this place is absolutely stuffed with billionaires. Tons of billionaires.

Robert Peston (42:37)

You know, the billionaires. I'm assuming you're not a billionaire.

Nick Bloom (42:41)

Next.

Robert Peston (42:42)

What's it like?

Nick Bloom (42:43)

I am not, unfortunately, a billionaire. No. And unfortunately, none of the billionaires have given me any of their billions. But, you know, they're all around, and just to point out, mostly they don't have American accents. They're mostly immigrants that come over to the US and started something up. Or if they're American, they're almost all second generation. Their parents came over and they come here and, you know, they make something of it. Britain actually has a huge advantage, which is our language is English.

Robert Peston (43:07)

Yeah.

Nick Bloom (43:07)

Which means it's much easier for foreigners to come and, you know, make a success. Imagine if, I don't know, you're hungry. Learning Hungarian is not easy. But, you know, everyone basically speaks English already. So the big, you know, thing to do is make it easier for foreigners to come. Particularly educated, hard working foreigners to come, work, set up businesses and sure, they make a billion and we tax 20% of it and they keep 80 and that's, you know, a win. Win.

Robert Peston (43:30)

There will be some people listening to this who will say, we want more billionaires like that in Britain. And there'll be others listening who are saying, under, over, sort of, you know, over my dead body. This is one of those slightly controversial issues. I don't think this is the moment to explore it further, but it's a fascinating place to end and indeed it's a fascinating hook to get you back sometime to talk some more about all of these issues. So, Nick, thank you so much for joining me today. I thought that was an absolutely gripping conversation both about the history of Brexit and where we may be going in terms of our relationship with the European Union in the future. That's it for this episode of the Rest is Money. Thank you so much. It's goodbye from me and goodbye me

Nick Bloom (44:14)

and thanks very much for having me on.

Robert Peston (44:16)

It's been a of pleasure. All the best. Bye bye.