For the past eighteen months we have been forecasting that recession would be followed, not by a strong recovery, but by a prolonged phase of sluggish output growth and rising unemployment. Developments since the beginning of this year suggest that our previous assessments, so far from being too pessimistic, may if anything have over-stated the prospects for recovery on unchanged policies, though the abolition of hire purchase controls announced recently should impart a small stimulus in the second half of the year.

This paper presents some results derived from a wider National Institute study of labour productivity differentials in non-service activities in the British, American and German economies, to be published as a NIESR Occasional Paper during the autumn 1982. For the most part the present paper focuses on the international labour productivity differentials which emerge at the major sector level—for agriculture, extractive industries, manufacturing, construction, public utilities and transport. The complete study will also consider productivity differentials for component activities in these sectors and seek some explanation of contrasts in international industrial performance in terms of such factors as capital intensity, market size, rates of growth, labour force quality etc.

Work on a project examining recent trends in UK labour productivity is being carried out at NIESR for HM Treasury. It has always been envisaged that one facet of this work should involve an attempt to learn from the experience of other industrial countries. Given the interest aroused a few years ago by the publication in the Review of D. T. Jones's article on comparative labour productivity, the updating of some of his work seemed to be an appropriate way both of adding an international dimension to the present project and also of providing continuity of interest with earlier NIESR work in the same general field.

During recent years observers of the UK economic scene have frequently commented on its ‘low level of technology’ and its ‘poor technological performance’. Translated into more specific terms, such observations seem to refer to the level of innovative activity in the UK and/or to its supply of engineers and other skilled-labour, relative to that in other advanced industrialised countries. Admittedly inter-country comparisons of these variables are often difficult, as different countries may use different indicators (and definitions) of innovative activity, have different types of educational qualifications, etc. Nevertheless, recent research does make possible some general comparisons. Pavitt (1981) reports, on the basis of industry-wide data on Research and Development (R and D) and international patenting, that innovative activity in the UK has in recent years been lagging behind that of its international competitors and the observation of Albu (1980) that in the supply of well qualified engineers and technologists the UK compares unfavourably with Japan and West Germany is reinforced by Prais (1981) in a more detailed comparative study of the UK and West Germany. Pending further research, these studies provide tentative evidence of the UK's relatively ‘low level of technology’.

Last year was marked by what appears to have been an unprecedented improvement in the productivity of manufacturing industries. The previous half-decade was distinguished by a productivity slowdown. This article considers recent movements in productivity at Industrial Order level, and reports the results of a survey, carried out at the end of 1981, on the factors which had been important in determining companies' productivity growth through the seventies.