A couple of months ago, I started noticing something on LinkedIn: economists I knew at the Bank of England were announcing they were leaving the institution (always, curiously, with a picture of the building behind them). Many of them very good researchers. First it was just one, then two, but by now I have honestly lost count. It turns out that this trend is a consequence of the voluntary exit scheme that the Bank implemented and that closed in mid-January.

The numbers are substantial. Though not official, the reported numbers of staff leaving are around 450, which represents 8% or so of the total workforce. Apparently, more than 700 employees volunteered to leave the Bank, so not everyone was allowed to do so under those conditions (reporting here). It says something when you open a voluntary redundancy scheme and it becomes oversubscribed by over 50%.

But why is the Bank doing this? This move responds to budget concerns that coincide with the implementation of the Bernanke Review. The Review provided a set of recommendations, and can be read here. One set of recommendations that apparently has hit the budget substantially is the upgrading of the infrastructure of the forecasting. While forecasting errors at the Bank of England were not particularly bad—compared to other central banks—Bernanke found that the software infrastructure supporting the process was lacking. This led the Bank to act to improve it.

As it sometimes happens with these reports, full of (very relevant) recommendations, the leadership decides to focus on those that they prefer. For instance, under recommendation 6, Bernanke states that “Researchers with doctorates should continue to spend part of their time in undirected or loosely directed research, with the best researchers afforded the opportunity to continue working on their individual agendas throughout their careers.” Given how many PhD researchers I have seen (on LinkedIn) leaving the Bank, this recommendation has not been particularly prioritized.

But trimming a policy institution does not need to be a bad thing. The issue is, however, who leaves. Leaving is a decision that is based on the stage of one’s career, immediate short-term pressures, and outside options. Other things equal, those with better outside options will tend to take the leave. Note that not everyone was allowed to get the redundancy package. But judging by the number of LinkedIn posts of top researchers leaving the Bank, it is clear that they were not the profiles that they wanted to keep. So those with better outside options are more likely to apply for the package, which means that the research quality of the institution is likely to drop. This is the opposite of what you would want: a well-designed scheme would retain the best, not lose them.

But why should the Bank of England, or any other policy institution, have PhD economists doing research? Let’s put some numbers for context. The Bank of England lists 80 researchers on its website, and this might not be updated with the recent departures. So we are talking about a small percentage of the overall workforce. And having rigorous experts that can lead the work on understanding the effects of policies and other actions is crucial for improving the functioning of the institution. This is true in general, but it might be specifically important now with new technologies with uncertain effects on the labour market, a push towards de-regulating the financial sector, and a strong pressure to make central banks less independent.

I also think that the impact might be uneven. On the monetary policy front, we know that the Bank is working on the forecasting part, so the loss of the research talent might be compensated by that. But other areas, such as financial stability or more policy-oriented departments, the departures might be felt more acutely. And central banks have a really thankless job on the financial stability side: if regulation works well, the calls for de-regulation come. If regulation does not work and risks materialize, then of course the central bank is to blame for it. Losing academic and analytical rigour in this moment can end up being a liability later. Let’s hope it does not come to that.