The UK economy entered 1992 having experienced one of the largest falls in the volume of domestically produced output during a single calendar year in the post-war period, with output likely to have fallen by close to 2.5 per cent in 1991. However the pace of the decline has begun to moderate in recent months, with activity in the second half of the year around 2 per cent lower than a year earlier. With oil production having recovered since the summer, it seems likely that onshore activity declined for the sixth successive quarter in the final three months of 1991.

The US, the UK and Canada all experienced recessions in 1991, whilst in Germany and Japan activity began to slow markedly. Most commentators, including the Institute, underestimated the length and severity of the recessions being experienced by the UK and the US. Data for the third and fourth quarters, along with recent information on expectations and on consumer confidence, have caused us to revise down both our estimate of growth experienced in 1991 and our forecast for growth in 1992. The summary details of our forecast are given in table 1.

Relative levels of labour productivity are estimated to have been about 22 per cent higher in German than in British manufacturing in 1987. The German productivity advantage was most pronounced in non-electrical engineering, vehicles and metals. The British performance was relatively better in food, drink and tobacco and textiles and productivity levels appear to be about equal in the two countries in chemicals and electrical engineering. About 80 per cent of the productivity gap in aggregate manufacturing can be accounted for by differences in the levels of both physical and human capital. The aggregate productivity ratio of 22 per cent is lower than that found for 1968. The time pattern of relative productivity in the intervening two decades shows a considerable increase in the 1970s followed by a rapid narrowing of the productivity gap in the 1980s.

Over the course of the twentieth century housing wealth in the UK has risen dramatically; recently it has become easier for households to borrow against that wealth. The process by which real housing wealth has growth—through long-term increases in the relative price of homes and substantial real investment in the stock of dwellings—has implications for the impact of financial liberalisation upon saving future house prices and bequests of housing. This article takes a long-term perspective on housing in the UK in order to answer questions of great practical importance. The interaction between savings, population changes, bequests of properly, housing investment and house prices is analysed and the forces driving these variables into the next century are assessed.

This article investigates international productivity differentials in one industry over the last 10 years, and the impact of skills differences. In 1981-3 interviews were held with Chief Executives and other personnel down to the level of the shop floor, in 56 matched vehicle component manufacturers in Britain, Germany, the USA and Japan. In 1989-90 further, more limited, interviews were carried out in 22 British and 23 German vehicle component manufacturers to gauge the effects of past differences and to investigate more recent progress. Findings suggest that substantial progress on manning levels and labour flexibility has resulted in some narrowing of the productivity gap against Germany, but a large gap remains against Japan. It is suggested that Britain may need to look to the Japanese skills model, emphasising high standards of basic education and vigorous programmes aimed at continuous employee development.

A topic of some current interest to forecasters and policymakers is the extent to which the high levels of corporate indebtedness observed throughout the late-1980s contributed to the recession and whether the still substantial debts of the corporate sector are likely to make the recovery from recession slower than normal. The purpose of this note is to present and provide an interpretation of the evidence bearing on this issue.

On 7 February 1992, European Community Foreign and Finance Ministers signed the Treaty on European Union which contains only the second set of constitutional amendments to the EEC Treaty since 1957. This new Treaty merged into one text the Treaty on Economic and Monetary Union and the Treaty on Political Union which had been agreed at the European Council in Maastricht two months previously.