We analyse the trade routes between the UK and EU countries. Our results show that the relative importance of the UK as a trading partner in the EU has slightly decreased. We further decompose the total value added into components that quantify the value added that is generated through direct trade with the UK and the indirect trade that is channelled through third countries. Close to one third of the total value added is generated through indirect trade and two thirds through direct trade. Furthermore, 18 per cent of EU countries’ value-added trade to the UK passes through the UK onto other countries.

This paper considers two aspects of this question. First, Brexit has already induced a devaluation of sterling of around 14 per cent since June 2016, which has started to work through to consumer prices: between June 2016 and July 2017 consumer prices increased by around 2.5 per cent. Second, while it is not government policy, nor the desire of the UK public, that the outcome of negotiations is a ‘MFN Brexit’, this remains a distinct possibility. Thus we ask how the imposition of tariffs on imports from the EU will work through into consumer prices. Making very conservative assumptions, we conclude that ‘MFN Brexit’ will increase the average cost of living by around 1 per cent and increase it for 8 per cent of households by 2 per cent or more. We present results for different groups of households according to their employment and structural characteristics and show that the impact will generally be largest on unemployed, single parent and pensioner households.

Free movement has been at the heart of the Brexit debate, with the government grappling between satisfying public and business demands for restrictive and liberal approaches to immigration respectively. In response the government have advocated temporary migration as a potential solution, including an expanded UK-EU Youth Mobility Scheme (YMS) modelled on the current T5 YMS on the assumption that YMS migrants undertake low-skilled jobs. Little is known about this visa or the labour market activity of YMS migrants. Drawing on policy analysis alongside survey and interview data from Australian YMS migrants, this paper seeks to bridge some of these knowledge gaps, arguing that an expanded EU YMS will not attract significant EU migrants, and is far from a remedy for free movement ending.

A major part of the 2010–15 UK government's education reforms in England was a focus on the curriculum that pupils study from ages 14–16. Most high profile was the introduction of the English Baccalaureate (EBacc) performance measure for schools, incentivising study of “subjects the Russell Group identifies as key for university study” (Gibb, 2011). However, there does not appear to be good quantitative evidence about the importance of studying such a set of subjects, per se. This paper sets out to analyse this question, considering whether otherwise similar young people who study specific sets of subjects (full set for EBacc-eligibility, two or more sciences, foreign languages, applied subjects) to age 16 have different probabilities of entering university, and specifically a high-status university. It compares results from regression modelling and propensity score matching, taking advantage of rich survey data from a recent cohort of young people in England. We find that conditional differences in university entry attributable to subject choice are, at most, small.

A backlash against numerous inequalities – and in particular against perceived unfairness in society – is a significant driver of the UK's current political malaise. Addressing inequalities between income groups, regions and generations will thus be key to re-establishing faith in government and avoiding further decline or even the threat of social unrest.

In income terms, the UK has become much more unequal than in the immediate post-war decades, and it should be a goal to reverse that trend – targeting the OECD average for income inequality and a halving of the number of those living below the poverty line. Measures to deal with perceived unfairnesses could include tighter scrutiny of competition in high-yielding sectors such as technology, and incentives for the appointment of worker representatives to company boards. But a government intent on tackling inequalities will inescapably need to raise public spending and direct taxation of income and capital from their current historically low levels. In particular spending on education and active labour market policies needs to increase, while gaps in the benefits system and regional imbalances are addressed.

Given the scale of technological change and the severe implications for the labour market, the risk is that policy will be insufficiently bold to deal with widespread disenchantment, which could ultimately pose a threat to democracy.

With international trade increasingly undertaken within vertically fragmented supply chains, this paper considers the impact of changes in trade costs on domestic output. In the context of the UK’s exit from the EU we show that the negative impact on UK output will depend on changes in both domestic and export competitiveness. Since for many firms the majority of their sales are to the domestic market, the domestic competitiveness impact may be quantitatively more important. The impact on output will be more significant the greater the integration of firms in international supply chains, and the greater the asymmetric impact of leaving the EU on UK firms relative to EU firms.

Under the Trump administration, a transatlantic trade conflict has been escalating step by step. First, it was about tariffs on steel and aluminium, then about retaliation for the French digital tax, which is suspended until the end of the year. Most recently, the US administration threatened the European Union with tariffs on cars and car parts because of Canadian seafood being subject to lower import duties. As simulations with NiGEM show, a further escalation of the transatlantic trade conflict has the potential to slow down economic growth significantly in the countries involved. This is a considerable risk given the fact that the countries have to cope with the enormous negative effects of the pandemic shock. Furthermore, the damage caused by the trade conflict depends on the extent to which the affected countries use fiscal policy to stabilise their economies.

For path-breaking insights on how prices can guide the efficient allocation of resources and how innovation and investment can spur economic growth, Adam Smith is justly renowned. He was, however, well aware of problems posed by market dominance—specifically in banking and, more generally, wherever getting to the scale that delivers increasing returns leads to monopolistic behaviour. For the historical record, we draw on the recent wide-ranging survey by Acemoglu and Johnson on how the benefits of innovation have been spread across society since the Industrial Revolution. We also consider these issues in the context of geo-political competition.

A four-pronged approach to climate policy is presented consisting of carbon pricing, subsidies for renewable energies, transformative green investments and climate finance and engendering flywheel effects. Then, a variety of societal and political challenges and obstacles faced by such a climate policy and what can be done to overcome them are discussed. These range from stranded assets, the very long time scales needed to adapt and deal with global warming, intergenerational conflict, international free-rider problems, carbon leakage, green paradoxes, policy failure and capture, adverse income distributional effects and spatial scarcity to the problem of climate deniers and sceptics. The paper also discusses the various tools that are needed for the analysis of both ideal and workable climate policies, and the need to collaborate with complexity scholars, political scientists, sociologists and psychologists.

Across the United Kingdom public (and private) resources have been targeted on improving broadband infrastructure. While this has served to provide new opportunities for households and firms, there has been some debate around the ability of firms to take full advantage of the opportunities that arise through this evolving infrastructure. In this respect, there has been particular debate on how far small- and medium-sized enterprises (SMEs) have taken up the challenge of effectively engaging with the resource. Drawing on the case of Wales, this paper explores the digital maturity of a sample of Welsh SMEs. The paper provides evidence of how far SMEs are successfully engaging with the new opportunities available through broadband, and develops a typology of firms according to their engagement. The paper then explores how these differences produce policy implications.

• The UK economy is expected to grow by 2.0 per cent in 2016, down from the 2.3 per cent predicted in the February Review. Growth will pick up to 2.7 per cent in 2017.

• We expect the Bank of England to start raising interest rates in November. Rates will then continue rising throughout 2017, ending the year at 1.5 per cent.

• Although broadly unaffected in 2016, GDP is projected to be 1 per cent lower than our baseline forecast in 2017 if the UK votes to leave the European Union in next month's referendum. In the longer run, GDP is expected to be between 1.5 and 3.7 per cent lower than our baseline forecast.

A key insight from Adam Smith is that economists should base their conclusions about a monetary institution or policy on a careful study of the history of that institution or policy, a study that includes the experiences of other countries. To illustrate Smith’s reliance on financial history we cover five current monetary problems that have close analogies with problems that Smith discussed: (1) inflation, (2) banking panics, (3) public debt, (4) usury laws, (5) central bank digital currencies.

In 1946, when the Soviet economy was still suffering acutely from war damage, Stalin addressed a meeting in Moscow and announced some long-term economic targets : the aim, he said, was to treble the 1940 output of basic industries, and in particular to reach an output of 50 million tons of pig-iron, 60 million tons of steel and 60 million tons of oil. ‘This will take three five-year plans, or maybe longer’, he said, suggesting that he hoped to reach these goals in the early 1960s. Ambitious as his targets seemed at the time, they will in fact probably be exceeded by 1960—in the case of oil by a very wide margin. The period from 1946 to 1956 was one of exceptionally rapid growth. In the first years, the restoration of war-damaged productive capacity and reparations deliveries helped, but progress continued to be very rapid during the fifth five-year plan (1951–1956), when these factors were no longer important.

This paper charts the evolution of mainly empirical research at the NIESR over the 1970s and 80s. As was all too evident there were very large discrete technical improvements in data handling and manipulation over this period. Less well appreciated were the effects on the economy of major supply-side shocks coming from the World economy leading to ‘Stagflation’ and, interconnected but somewhat later, in the UK, marked changes in macro policy regime. This latter was strongly influenced by the seminal papers of Lucas (1976) and Sims (1980); both highly critical of the then current practices in macroeconomics, though each having very different intellectual stances. The response in the NIESR was to engage at an early stage in these innovations; applying the mantra that an informed criticism was more efficient than an uninformed one. During this period it became a leader in the econometrics of applied macro modelling under different expectations assumptions, including the rational expectations hypothesis (REH). Throughout, it remained critical of the anti-empirical drift encouraged in the Lucas Critique, criticism borne out more recently by the financial instability of the 1990s and the crisis that followed.