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tooling-up, and an initial accumulation of unfinished work throughout the field of defence production, which will interrupt the recorded flow of output. In part this factor is merely statistical-the earlier slackening of output being balanced by an apparent acceleration when the finished products are recorded -but in part it represents a genuine loss of productivity, a genuine cost of switching industry from one pattern of output to another.

61. Secondly, there is no simple quantitative relationship between materials and output. Plentiful or less scarce materials can be substituted for those that are very scarce. Specifications can be altered and, of course, are being altered all the time. Many improvements in technique and design consist in making fewer materials do the same work. The rising cost of raw materials sharpens the normal incentive to the discovery and adoption of such improve- ments, beside stimulating the recovery of waste materials and scrap. Further, apart from such changes, the same rise in costs will tend to shift demand away from articles containing much costly materials towards those made with less. 62. Thus skill and imaginative effort can often prevent the shortage of a particular imported raw material from having anything like a proportionate effect upon output, and the Government makes a special appeal to industry at this time to exercise the utmost ingenuity in finding means of economising scarce materials. This is a matter in which formal controls are difficult, cumbersome and costly. The Government must rely to a large extent on the voluntary efforts of consumers.

63. It is in the light of these conflicting factors that forecasts of produc- tivity have to be made, and it is obvious from what has been said that any such forecast must be most uncertain at the present time. The future trend of productivity must depend above all upon what raw materials are available to manufacturers. For the purposes of this survey it has been assumed that production in the industries covered by the Interim Index will be 4 per cent. higher in 1951 than in 1950. Since production in the last quarter of 1950 was already about 4 per cent. above the average for 1950 as a whole, a 4 per cent. increase in 1951 implies no more than the maintenance of the end-1950 level. This increase is less than could have been hoped for, had it been possible to rely on adequate material supplies. Equally, it is more than would at present appear likely if the levels of imports of sulphur, cotton, zinc, copper and other basic materials at present in prospect cannot be improved upon. The difference between the rate of progress of the last three years and what may be realised in 1951 and 1952 must be regarded as part of the cost to us of our own and others' defence preparations.

The Metal-Using Industries

64. The metal-using group of industries covers a very wide range of inter-related activities, including all kinds of engineering, shipbuilding and the manufacture of electrical goods, road and rail vehicles, aircraft, precision instruments, jewellery, cutlery, hollow-ware, metal furniture, drop forgings and brassware.(') In 1950 these industries produced goods valued at about £2,400 million, providing about two-fifths of all United Kingdom exports and the great bulk of the plant and machinery used for home investment. Now, in addition, they will have also to produce large quantities of arms, at a time when shortages of materials must inevitably hamper the further growth of their production.

(1) In this context the manufacture of iron and steel and non-ferrous metals is excluded.

65. The output of these industries has expanded rapidly since the end of the war, as the figures in Table 7 show. In 1949 it was already some 40 per cent. greater than in 1946, and there was a further increase of no less than 10 per cent, in 1950. In the first two or three years after the war the rise in output was mainly explained by the reconversion of the metal-using indus- tries to peacetime work, but more recent increases have been largely attribu- table to improvements in productivity made possible by a freer flow of raw materials and by large expenditure on development and re-equipment. During the past two years new plants started since the war have been coming into production in increasing numbers.

66. Supplies of steel and non-ferrous metals are likely to set the effective limits to output in 1951, and in the light of what is already known about these supplies there seems to be no hope of production increasing anything like as much this year as last. It certainly cannot be expected to rise above the level achieved in the last quarter of 1950.

67. Significant changes will have to take place in the pattern of output from these industries as a result of rearmament. New capacity will have to be created for certain types of engineering production, and in particular for the manufacture of jet aero-engines and tanks, though this cannot affect output for some times 84 more immediate change will be the furtherPmanning off 587 aircraft factories and Royal Ordnance Factories hitherto working below their

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