THE CHANCELLOR of the Exchequer is in a mess, and he has only himself to blame. He has evidently not been taking the skirt question seriously enough. According to a Treasury spokesman this week: 'Hemlines are not factored into our computer models of the economy.' But why not? While factoring in productivity and currency fluctuations hasn't got us very far, the 'Hemline Indicator' has been an established concept among far-sighted economists for some years now. Norman Lamont, probably the only person in the country who is not thinking about skirts this week, could usefully return to planet Earth and start factoring with it.

There is, admittedly, still some controversy among economists about the Hemline Indicator's usefulness as a tool of economic modelling. But events of recent weeks could change all that. Since Black Wednesday, long skirts have been seen everywhere - except in the shops - as women respond in the time-honoured way to the plunging fortunes of the economy.

Of course, if Norman Lamont had studied his economic history, he would have realised some time ago that he need only spend a bit more time at fashion shows to stay ahead of the game. Hemlines rose during the confident, post-First World War flapper era, plunged in 1929 with the stock market crash, and stayed well down during the Depression. Skirt lengths rose until the Second World War came along to depress stock markets and the fashion industry. Dior's ankle-length new look of 1947 was a response to rationing; then as prosperity rose during the Fifties, so did skirts. By 1965 we were in the middle of a bull market; along came Mary Quant's mini. The sterling crisis of the mid-Seventies brought a return to a longer, droopier, ethnic look, and the confident, bull market of the Eighties had us all back in short skirts.

David Fuller, who brought the Hemline Indicator to Britain from Wall Street in 1969, points out that it 'has a lot more logic to it than many of the arcane theories that some analysts - not to mention Treasury theorists - adhere to'. According to Mr Fuller, who writes an international investment letter, FullerMoney, 'the Treasury advisers told us there wouldn't be a recession, then that we weren't having one, and only belatedly woke up to the fact that we were right in the middle of one. Designers were much more astute, and started thinking about long skirts several years ago. Investors who took notice of this were well-advised.'

Designers have been pushing these skirts at us for some time of course, but it took the foreign exchange dealers' frantic sale of sterling last month to tip us over the edge.

As the City bought German marks, girls bought skirts. It is as if a witchy, folk wisdom takes hold at times of economic stress: just as women who live together tend to synchronise their menstrual cycles, so at certain points in the economic cycle, a hemline imperative appears to sweep the land.

Modern women try to rationalise this phenomenon. 'My secretary was making me feel dowdy,' says Nicky, a television producer, aged 32. 'I kept seeing women in their late twenties in the canteen in lovely little lace-up boots, with long skirts split to the thigh. And there was I, prancing along in mini skirts and flat pumps, completely Eighties. I went out and spent pounds 160 on a long skirt from Harrods.'

But she admits that it was hardly a rational decision. 'My legs are my best feature. I've got nothing going for me if they're covered up. And nothing I've got goes with it. I think you're supposed to wear those skinny rib tops, but my arms are too fat. I really don't like it, but what can you do?'

The what-can-you-do? attitude is everywhere. The journalist Sally Brampton was at the London Fashion Awards dinner this week: 'Every single woman was wearing long. That wouldn't have happened last year. I feel a bit odd, exposed, in short now.' Manhattan designer Isaac Mizrahi said recently: 'It's really nasty to show your legs like that, to be that obvious.' Sarah, a 31-year-old advertising executive, felt nasty and obvious on the train to Stoke-

on-Trent this week: 'I felt really peculiar sitting there in a mini skirt, tarty, as though my underwear was on show. I won't do that again.' (In reality, your underwear is much more likely to be on show with a long skirt. Many of the new designs are skimpy wrap- overs - which mean that when the skirt flaps open, the whole office gets to look at your knickers. Is this what Vogue's fashion director Lucinda Chambers meant when she said recently: 'It should be worn with a suggestion of sex'?)

Actually getting hold of one of the new skirts is easier said than done. Francesca, a publisher, has a lovely pounds 60 wrap-over from Jigsaw, about which she is hugely enthusiastic. 'I feel quite glamorous in this; it removes all the fat-knee anxieties.' But there were no wrap-overs left in the branch of Jigsaw I visited this week. The shop assistant flipped along the rails, muttering about how they used to have gabardine in black, navy, green; and yes, wool too, in black, red . . . but sorry, there was nothing left. Searching further up-market, I found a few in Nicole Farhi - although significantly, no wrap-overs - but they were all excessively long, making a short person look absurd. A spokeswoman for the Whistles group confirmed that long skirt sales are now 'phenomenal, unbelievable'. Amanda Verdan, buying director of Harvey Nichols, said she was starting to worry about the short skirts she has bought in. 'I assumed a certain number of women would stick to short, would be nervous about not having shoes and jackets to go with them. But no, long skirts are going at every price range.'

Peter Spencer, chief economist with Kleinwort Benson, says he is 'very well aware of the Hemline Index'. He adds rather slyly, however, that he doesn't 'look at hemlines in a professional capacity' although he has had 'several long conversations with other economists about the way ladies dress'. He adds: 'We are human, you know; we pay a lot of attention to this sort of thing. We're not totally obsessed with our computer screens.'

Mr Spencer doesn't think there is any mystical connection between clothes and economic activity: 'When times are hard, buying the new length enables us to stand out, to say 'I'm not doing too badly'. ' (You really do have to be doing not too badly: you not only need the skirt, but the shoes, coat, tops to go with it). Another way of looking at it, of course, is that people in the fashion industry are fed up, like the rest of us, with being broke. Forcing half the population to buy a whole new wardrobe is a good wheeze.

(Photograph omitted)