In the early months of the year the trend of output in OECD countries was still apparently upward—sharply upward in Japan and Italy—with the United Kingdom probably the only important exception to the general rule. There was, however, a growing number of indications that production was running ahead of demand and consumers' expenditure ahead of real disposable incomes. It seems increasingly clear that a period of readjustment must be expected and in the United States it appears to have begun, though otherwise it is little easier than it was three months ago to assess its likely timing, duration or extent. Our own view is that it is imminent but will be neither protracted nor severe.

Since our last forecast a number of events has led us to form a slightly more pessimistic view of the outlook for the UK economy. These factors are principally a somewhat lower forecast for world activity levels as set out in the previous chapter, a steep rise in import prices in the first quarter of 1980, a small increase in the outturn of the current wage round over that previously forecast and a further depression in public expenditure planned in Cmnd 7841 for 1981 below that which we forecast under ‘unchanged policy assumptions’ before the budget.

The world's non-renewable resources are obviously finite—and the renewable ones are also limited—and without scientific and technological advance mankind would long ago have been facing serious material shortages. Earlier anxieties, however, did not materialise since new materials have been discovered or new methods introduced to produce and process them. This study surveys the history of some three dozen materials which are new, or were ‘new’ at the time of their introduction in general use. Many of them were developed or discovered as the outcome of a need—wartime or market pressure—whilst others were the result of spontaneous and random scientific/technological push. The conclusion suggests that whilst history does not necessarily repeat itself in solving future problems of material shortages it provides basis for the hope that progress will overcome possibly emerging scarcities.

This article examines the problems of the machine tool industry in Britain by contrasting its performance and structure with the corresponding industry in Germany and the United States. The industry is one in which Britain's productivity, export performance and technology have lagged behind Germany and the United States since before the Second World War; these aspects are discussed in the first half of the article. The latter half considers how Britain's deficiencies in technical skills have affected the machine tool industry; the engineering industries as a whole are of course affected in varying degrees by similar factors.