• Our baseline forecast is for global growth of 3.7 per cent in 2012. Growth will accelerate to 4 per cent in 2013. These forecasts are little changed from our previous forecast.

• As in our previous forecast, we assume a delayed but ultimately successful resolution of the Euro Area crisis. Nevertheless, we expect a mild recession in the Euro Area as a whole, as well as in the UK. Downside risks to the Euro Area remain high. Fiscal austerity will weigh on growth in the short term, while medium to long term structural problems remain unresolved.

• We forecast growth of about 2 per cent in the US this year, while China and India, although slowing, will continue to drive world growth.

• More than four years after the start of the recession, the economy is well over 4 per cent below its pre-crisis peak. This persistent weakness is unprecedented.

• Growth this year will be close to zero, but about 2 per cent in 2013. This is essentially unchanged from our January forecast.

• Although our inflation forecast has increased, largely as a result of the increase in oil prices, we still expect it to fall below target by the end of the year

• We expect the cyclically adjusted current budget to be in slight surplus in 2016–17.

• We expect the unemployment rate to rise to almost 9 per cent at the end of this year, and to remain elevated throughout the forecast period. This will do permanent damage to the UK's productive capacity.

The production of this forecast is supported by the Institute's Corporate Members: Bank of England, HM Treasury, Mizuho Research Institute Ltd, the Office for National Statistics, Santander (UK) plc and by the members of the NiGEM users group.

This study looks at the recent development (1998–2009) in the number of years of schooling that a 6-year old can expect to attend until their 30th birthday for the EU-27 countries. All countries have seen an increase in the number of expected years of schooling, which is driven mainly by increased tertiary enrolment rates. At the same time the education gap vis-à-vis the US has been closed. The dispersion of expected length of education among EU countries has also decreased. Thus, by this measure, education among countries has become more equal. In spite of this progress, some countries will find it difficult to meet their national targets for tertiary educational attainments for 30–34 year-olds in 2020. This is largely because the tertiary education participation rates of young males have been falling behind those of females in many countries. Focussing on the tertiary educational attainments of 30–34 year-olds leaves governments with little time to pursue policies with substantial impact. It would be preferable to supplement the educational attainment target for 30–34 year-olds with an enrolment target for 20–24 year-olds.

This paper presents new data series designed to yield a more complete picture of the growth in average skill levels embedded in the EU workforce, comparing with competitor countries such as the US and China. Harmonised data from EU surveys are employed to extend coverage in existing databases to more countries, to cover the period of the financial crisis, and to skills acquired through informal workforce training. The results indicate growth in labour quality in the EU15 marginally below the US, convergence of the group of new member states to the EU15 but no sign of convergence of China to more developed regions. There is evidence of a pronounced rise in labour quality in most countries after 2007, consistent with theories of labour hoarding, but with some notable exceptions. Expanding the conventional measures of labour quality to include informal training leads to small but significant increases in the growth of human capital in some EU15 member states.

Financial crises, and in particular those of the past few years, have severe consequences for the affected economies. In this paper we analyse the impact of financial development and European financial integration on growth and we find no reversal of the growth benefits of financial development and integration in recent years. This highlights the economic cost of regulatory changes that would reverse European financial integration. We also find that, following a financial crisis, investment declines more in countries with a greater degree of uncertainty aversion, which can be informative for evaluating post-crisis economic performance.

Against the background of the increasing services content of many manufactured goods, the paper attempts to assess the role of (domestically and internationally) purchased service inputs for the relative export performance of countries in a particular manufacturing industry. It estimates an empirical model of export market shares for EU15 countries and twelve disaggregated manufacturing industries over the period 1995 to 2007. Whereas most traditional explanations are based on the influence of relative costs and technology-related variables, this paper emphasises the importance of services as a determinant of both product quality and the sectors’ productivity. The service linkage variables are based on national input–output tables. The analysis finds a positive and highly significant impact of services on export market shares of manufactured goods. Distinguishing between domestically-sourced service inputs and imports results in a robust and highly significant impact of international service linkages, while the analysis finds no impact of domestic service linkages.