Using annual observations on industrial production over the last three centuries, and on GDP over a 100-year period, we seek an historical perspective on the forecastability of these UK output measures. The series are dominated by strong upward trends, so we consider various specifications of this, including the local linear trend structural time-series model, which allows the level and slope of the trend to vary. Our results are not unduly sensitive to how the trend in the series is modelled: the average sizes of the forecast errors of all models, and the wide span of prediction intervals, attests to a great deal of uncertainty in the economic environment. It appears that, from an historical perspective, the postwar period has been relatively more forecastable.

The global economic downturn has led to a crisis in labour markets, with an estimated 15.2 million job losses across the OECD economies, equivalent to a rise in the OECD unemployment rate from 5.5 to 8.9 per cent. Initially, the rise in unemployment appeared lower than expected. In Holland, Kirby and Whitworth (2009) we demonstrated a simple rule of thumb between output growth and the unemployment rate in the OECD as a whole, based on Okun's approach. Using a dataset that spans the period 1988–2008, regression analysis suggests that on average a 1 per cent decline in output is associated with a rise of 0.6 percentage points in the unemployment rate across the OECD economies. Between the first quarter of 2008 and the first quarter of 2009, output in the OECD economies declined by 4.8 per cent. The unemployment rate rose by 1.9 points over this period, as compared to 2.9 per cent given by the rule of thumb. However, the labour market tends to lag production. While most of the major economies started to grow again in the second or third quarters of 2009, OECD unemployment continued to rise into the final quarter of the year, with a cumulative increase in the OECD unemployment rate of 3.4 percentage points — even higher than that suggested by our rule of thumb.

We analyse how a change in the probability of winning a tournament affects an agent's effort using the qualification rules for entry into the group and playoff stages of the UEFA Champions' League. Our results suggest that increasing the number of slots that a national league gets in the Champions' League leads to increases in investment in talent ex ante. This effect is largest among the teams that in the previous season just failed to qualify. This suggests that changes in prize structure leads to changes in investment decisions amongst those clubs most affected at the margin. However, we also find that incumbent teams that have already qualified for the Champions' League simultaneously raise their efforts, consistent with the occurrence of an arms race among top European football teams.

The publication on 5 April 1967 by the Department of Economic Affairs and the Treasury of the paper containing a proposal for a regional employment premium is a notable event for at least two reasons. In the first place it establishes an important precedent in what is essentially the budgetary field by putting forward a government proposal for public discussion in advance of the introduction of any specific measure of legislation. In the second place it provides a brief and lucid analysis of the problem of the development areas as a background for the proposals that it develops.

UK labour productivity is significantly lower than that of many other similarly advanced economies and has been so for decades, with negative implications for UK living standards. To make matters worse, during the last ten years labour productivity growth has stalled in most industrialised countries, and particularly in the UK. This has led to a renewed policy focus on productivity growth, as evidenced by successive government productivity plans and efforts to re-invigorate industrial strategy. This paper reviews the evidence on UK productivity performance, identifying what we know about the causes of its weakness, what we do not know and what this means for policy. We review the evidence through the lens of developments in economic measurement, drawing in particular on the work of National Institute colleagues past and present, and with a view to the key measurement challenges ahead that, unlocked, will help us understand better what is holding back UK productivity.

When economists talk about ‘measurement’ they tend to refer to metrics that can capture changes in quantity, quality and distribution of goods and services. In this paper we argue that the digital transformation of the economy, particularly the rise of cloud computing as a general-purpose technology, can pose serious challenges to traditional concepts and practices of economic measurement. In the first part we show how quality-adjusted prices of cloud services have been falling rapidly over the past decade, which is currently not captured by the deflators used in official statistics. We then discuss how this enabled the spread of data-driven business models, while also lowering entry barriers to advanced production techniques such as artificial intelligence or robotic-process-automation. It is likely that these process innovations are not fully measured at present. A final challenge to measurement arises from the fragmentation of value chains across borders and increasing use of intangible intermediate inputs such as intellectual property and data. While digital technologies make it very easy for these types of inputs to be transferred within or between companies, existing economic statistics often fail to capture them at all.

There was a wide measure of agreement that unemployment in Britain during the 1920s was aggravated by lack of international competitiveness. This was the basic issue underlying the debate over the return to the gold standard. The experience of the restored gold standard did much to confirm the arguments of those like Keynes who had claimed that sterling was overvalued at $4.86. This view of the problems of adjustment to an overvalued exchange rate has been endorsed by both Johnson (1975) and Friedman and Schwartz (1963). A major element in competitiveness was the level of real wages. Britain's difficulties in the inter-war period were made more acute by the increase in the cost of labour between 1913 and 1924. This reflected the sharp rise in wages in the First World War and the post-war boom of 1919-20, which was only partly corrected in the recession of 1921-2. The reduction in working hours in 1919, when normal weekly hours were reduced from 53 hours to 47, also raised the cost of employing labour. As a result hourly real wages in 1924 were 28 per cent higher than in 1913 and real wages measured in terms of own product were increased by 20 per cent, while output per head had risen by only 5 per cent over the same period. The increased cost of employing labour was particularly noted and emphasised by Clay (1929).

The need to decarbonise the economy in order to slow the pace of climate change is now recognised as one of the most pressing international policy challenges. While the UK cannot by itself materially affect global climate change, it has an opportunity to play an influential role, both by persuading others of the need for action but also by reshaping its domestic economy to benefit from a low-carbon transition.

Far from hampering competitiveness, adoption of a coordinated policy approach to climate change today would generate positive benefits for the UK economy, especially if it addresses the multiple market failures that promote pollution and places decarbonisation at the heart of structural economic policy.

Desirable strategies would include public support for research, development, and deployment of new technologies, and measures to foster an environment where innovation can rapidly shift the economy from dirty to clean production systems. Focusing UK industrial strategy on securing strong domestic supply chains for green products and services, for example, could help create an early mover advantage in rapidly growing global market sectors. Interventions could include the establishment of a National Infrastructure Bank to support decarbonisation in crucial sectors such as energy and transport, and would also need to encompass measures to assist structural adjustment in affected industries and their workforces.

The past few months have seen a growing debate on the question of migration. There is little doubt that there has recently been a sharp inflow of migrants into the United Kingdom, raising a range of both economic and social issues. In this commentary we consider the structure of recent immigration and assess some of its economic consequences.

Government has promised that Britain will build a vocational route based on apprenticeship to match that found in the rest of Europe. However, judged on the first five years of Modern Apprenticeship, every important aspect of apprenticeship in Britain will need to be strengthened and improved if the government's aspirations are to be realised.

We analyse the costs of Brexit. The results show that by 2030 a hard Brexit would reduce cumulative GDP growth by 18 percentage points compared to a situation where the UK continued its EU membership. The economic damage in our FTA and soft Brexit scenarios is less severe than in our hard Brexit scenario, although it will still cost the UK economy roughly 12.5 percentage points and 10 percentage points of cumulative GDP growth by 2030, respectively. We find much larger negative effects than most existing studies that use macroeconometric modelling to assess the effects of Brexit. This is due to two reasons. First, we use an improved tariff version of the macroeconometric model NiGEM, which enables us better to assess the negative impact of cost-push inflation resulting from imposed trade barriers. Second, we estimate a new productivity model for the UK, which allows us to gauge adequately the negative UK-specific effects on productivity caused by Brexit.

The past 25 years have been characterised by a surge in international trade as economies have become increasingly inter-linked. In many advanced economies this surge has been associated with increased import competition from low-wage economies. This paper explores the effects of such competition on manufacturing jobs in the UK. We consider two developments that influenced the nature of international trade: the ascendency of China as an important player in global markets and the accession to the European Union of a number of Eastern European economies in 2004. Both of these changes were associated with a shift in trade regimes and led to a sharp rise in import competition in particular UK manufacturing sectors. We find that these changes are likely to have hastened the decline of UK manufacturing.

The whole of Europe has embarked on a major programme of economic change. The former CMEA countries are trying to move rapidly from state planning to market economies. In the west, not only is the European Community well down the road to removing a large number of non-tariff barriers between the member states through the Single Market programme—extended to EFTA through the European Economic Area agreement but it has also agreed, through the Maastricht Treaty, to try to converge to an economic and monetary union with low inflation, low public sector deficits and controlled public debt, before the end of the century. Negotiations are beginning over extending this, through full membership of the Community, to Austria, Finland, Norway and Sweden.

This article describes the current versions of six major macroeconometric models, and analyses their overall properties as revealed in standard simulation experiments. Particular attention is given to a policy issue of long-standing importance, namely the control of the size of the government budget deficit. Analysis of the impact on the government budget deficit of a range of policy instruments under a number of deficit-funding regimes shows that there is considerable disagreement between the models on the size and time-profile of these effects. Modelling of the exchange rate remains a key issue in assessing differences in model behaviour.

No one can deny the outstanding success of the East Asian economies in the last two decades of rapid economic growth backed by surging capital inflows. Key questions posed by the current crisis are: what went wrong, and why? how to fix it? and, how to prevent a recurrence? To answer them, the article begins with a brief overview of recent developments in the miracle economies of East Asia, focusing mainly on Korea, Indonesia and Thailand. We focus too on some of the shadows that came to darken the glittering success story—on declining competitiveness and growing financial vulnerability; and on regulatory failures in banking. Then we take a leaf from Charles Kindleberger's book (1996) on Panics, Manias and Crashes and discuss—with historical precedents—various types of financial crisis: speculative attacks on pegged exchange rates, asset bubbles, stock market crashes and bank runs. Based on the distinction between illiquidity, due to a shortage of cash, and insolvency arising from a failure of economic prospects, we go on to outline three main views of the current crisis.

First that it was simply due to reversal of capital flows, to a failure of collective action on the part of creditors which could and should have been solved by supplying extra liquidity—or by forcing creditors to roll over their loans. Second the view that the miracle had grown into a bubble that had finally had to burst: so the problem was essentially one of insolvency. Finally the view that we prefer, that the panic was not wholly groundless (and rescue efforts were bound to be difficult) mainly because weak regulation combined with implicit deposit guarantees had left local bankers free to gamble with the money that global capital markets had poured into their parlours. Panic set in when foreign depositors realised that there were not enough dollar reserves left for the guarantee to be credible. This account (championed most notably by Paul Krugman of MIT) involves both illiquidity and insolvency and helps to explain why the IMF was unwilling simply to throw money at the problem.

Why did the crisis spread like wildfire around the region? Was it because a bank run due to shaky fundamentals in one country was imitated elsewhere, as investors joined the herd heading for the exit? This and other accounts of contagion are discussed before turning to ideas for crisis prevention and management, and a brief account of future prospects for the region. The article concludes by outlining immediate steps to resolve the current financial crisis and by proposing international monetary reforms to prevent a recurrence.

This article sets the broad facts of the industrial performance of the UK in the post-war period within a European context. Using purchasing power parity rates the relative levels of labour productivity between countries are compared, for GDP, manufacturing and six sub-sectors of manufacturing. By 1973 the UK had the lowest level amongst the countries studied. Growth rates of output, employment and labour productivity are estimated for four periods since 1955 and the relatively slow growth rates in the UK are analysed.

This article describes a variety of simulations carried out with the three major macroeconomic quarterly forecastingmodels of the UK currently in operation—those of the Treasury, the London Business School and the National Institute. The simulations cover both fixed and floating exchange rate regimes.

This paper reports on the availability of regional capital stock data,1 in the form of new/updated regional (NUTS2 level) capital stock estimates,2 building on an approach (Perpetual Inventory Method) which had been previously developed for the European Commission. The particular focus here is on the UK and how these data are used to shed light on regional labour productivity disparities. Using a NUTS2 level dataset constructed for the period 2000–16, we use a dynamic spatial panel approach from Baltagi et al. (2019) to estimate a model relating productivity to output (growth or levels) and augmented by explicit incorporation of capital stock plus various other covariates such as human capital. We find that regional variations in capital stocks per worker make a significant contribution to regional variations in labour productivity, but the geography of human capital is also highly relevant. Moreover, we give evidence to show that as human capital rises, notably as we move from the regions to London, the impact of capital stock per worker is less. The effect of capital stock depends on the level of human capital.

‘And coming home, did go on board Sir W. Petty's Experiment—which is a brave roomy vessel—and I hope may do well. So went on shore to a Dutch house to drink some Rum, and there light upon some Dutchmen, with whom we had a good discourse touching Stoveing and making of cables. But to see how despicably they speak of us for our using so many hands more to do anything then they do, they closing a cable with 20 that we use 60 men upon’ (Samuel Pepys' diary for 13 February 1665)

This article compares the output per person-hour in 16 branches constituting the total manufacturing sector of the Netherlands and the United Kingdom. The comparatively poor productivity performance of British industry, as documented in previous studies comparing Britain with Germany and the USA, is confirmed in this new comparison with a much smaller economy in the 1980s. The article examines differences in the industrial composition in the manufacturing sectors of the two countries. Part of the productivity gap is accounted for by the stronger concentration of Dutch manufacturing in capital-intensive industries and in the production of semimanufactured goods. However, a bigger slice of the gap must be attributed to factors such as differences in the pace of introducing new technologies in some of the branches, the quality of the labour force and the utilisation of the capital stock. The article also explores the relation between the average size of manufacturing units and the degree of vertical integration.