About 85 per cent of the fall in Britain's output of goods and services in 1990 and 1991 has now been reversed. Even the construction industry, which suffered a deeper and longer recession than any other part of the economy, has begun to grow again after more than three years in decline.
The recovery throughout the economy has been roughly as strong in the past two years as it was in the same period following the recession of the early 1980s, with national output rising by a little over 3 per cent from its nadir. As the recession of the early 1980s was deeper, we are now closer to fully reversing the preceding downturn than we were at the end of 1982.
But for many consumers and business people the evidence of economic recovery has seemed little more than a meaningless statistical illusion. For them this does not really feel like a recovery.
For example, the so-called boom in high-street spending over Christmas - much trumpeted by Chambers of Commerce and department store public relations whizz-kids - has turned out to be illusory.
Official retail sales figures show that high-street trading volumes rose by less than normal for the time of year last month. Their message was backed up by a number of cautious trading statements from leading retail chains.
A recent survey by the British Chambers of Commerce also cast doubt on the durability of the recovery by warning that growth might flatten as the economy soon approached a 'glass ceiling'.
And now tax increases are looming in April that will take more than pounds 8bn of spending power out of the economy this year, forcing consumers to tighten their belts with a knock- on effect on business. Kenneth Clarke, the Chancellor, not only has to disentangle the mixed signals about the recovery's current strength, he also has to decide how durable it will be when tax increases bite.
As Robert Napier, chief executive of Redland, the construction company, warns: 'There is a risk that the tax increases may stall what recovery there is. Given the strength of the pound, we can't understand why the Government doesn't make a further cut in interest rates. It's all still pretty fragile.'
Some sectors of the economy find evidence of an upturn less convincing than others. 'Talk of recovery doesn't strike a chord with the 5 million small firms in this country. They have really taken a battering. The only consolation is that things are not getting any worse,' according to Stephen Alambritis, spokesman for the Federation of Small Businesses.
Mr Alambritis argues that it is big business that is enjoying the upturn. 'But the danger in that kind of recovery is that big companies can meet demand without taking on more labour. Smaller firms can only expand by creating more jobs,' he says.
It has been big business that has shed jobs in the past few weeks. Since 8 January, three high street banks have announced nearly 9,000 redundancies between them, British Aerospace and BOC are each disposing of 1,700 people, while Fisons is losing 1,000 and Short Brothers more than 400.
But the number of redundancies is well down on its peak in the winter of 1992, when business confidence slumped in the aftermath of the pound's expulsion from the European exchange rate mechanism. Between September 1992 and January 1993, nearly 110,000 people a month were being made redundant, even though the economy had officially bottomed out and the recovery was already six months old.
This month's redundancies are not expected to reverse the recent fall in the headline unemployment total, which accelerated dramatically in the last three months of 1993. Unemployment has confounded the pessimistic predictions of City and academic economists throughout the past year, with the number of people without work and claiming benefit dropping by around 225,000 since last February.
But the fall has owed as much to a drop in the number of people looking for work as to the creation of new jobs.
Fewer young people are reaching working age than at the same stage of the last recovery, and more of them are choosing to go to college or university instead of entering the world of work. In addition, around 180,000 people said last summer that they would like work but had given up seeking it because they thought there were no jobs available. This figure will probably not have dropped by much since then.
Some jobs have been created by the recovery, however. But the nature of these jobs also casts a greater degree of doubt on the strength and durability of the recovery than the raw unemployment figures. The number of people in employment in Britain has risen by only 124,000 since its trough of 24,881,000 in the spring of last year, and women have taken almost all the new jobs created.
More than half the rise in the number of jobs filled in Britain has been in self-employment, with many former employees using redundancy payments as capital to start up on their own. Manufacturing, energy and water supply companies have continued to shed workers by the thousand, which is only offset by the creation of nearly 180,000 new jobs in service industries.
So the recovery in the jobs market has been dominated by part-time, insecure and often badly paid work for women in shops, hotels, catering and the like. These are precisely the sort of jobs that are likely to prove most vulnerable if April's tax increases trigger a retrenchment in consumer spending.
But the unexpected fall in unemployment over the past year can also be given a more optimistic interpretation. Some economists, such as Bill Martin of UBS, argue that the official statistics have understated the speed with which the economy has pulled out of recession.
It may be that the cuts in interest rates and fall in the pound following Black Wednesday have had a much more dramatic effect on the economy than so far thought. Some analysts believe that the current official estimate of 2 per cent growth last year could be revised to 3 per cent or more.
This upbeat view received some support from the most recent quarterly survey of manufacturers carried out by the Confederation of British Industry, widely recognised as an authoritative indicator of business conditions.
Having shown slowing improvements in business optimism throughout 1993, the January survey suddenly found factory bosses much more upbeat. Darren Winder, economist at Warburg Securities, argues that this points to an acceleration in the recovery in the months ahead.
But Mr Winder adds a note of caution. The number of bosses reporting that their factories still had extra capacity has dropped sharply since last autumn. Capacity only dropped much further below these levels in the late 1980s, when growth became unsustainable, inflation flared and the trade gap widened. But he argues that a resurgence in inflation is unlikely to threaten the recovery in the near future. We will simply not enjoy the continued fall in inflation that accompanied the upswing of the early 1980s.
Adam Cole and Adrian Cooper of James Capel reach a similarly optimistic conclusion. 'Many of the industries in which capacity utilisation has shown the most significant rise compete on global markets and are in effect 'price takers'. Furthermore, there seems to be some evidence that capacity itself has become more flexible and judging the CBI measure against its long-term average is inappropriate.'
So there is little reason to expect the Chancellor to change his policy of masterly inactivity on interest. He may be waiting to see whether, on the one hand, the statisticians decide recovery has already been much stronger than it looks, or on the other, whether tax increases and a strong pound threaten to push recovery into the sand. Political expediency, of course, might also intervene.
----------------------------------------------------------------- JOB CUTS ANNOUNCED SINCE 8 JANUARY 1994 ----------------------------------------------------------------- Fisons . . . . . . . . . . . . . . . . . . . . . . . .1,000 BAe . . . . . . . . . . . . . . . . . . . . . . . . . 1,760 Barclays . . . . . . . . . . . . . . . . . . . . . . .3,000 NatWest . . . . . . . . . . . . . . . . . . . . . . . 4,200 TSB . . . . . . . . . . . . . . . . . . . 'fewer than 1,700' NHS . . . . . . . . . . . . . . . . . . . . . . . . . 2,000 BOC . . . . . . . . . . . . . . . . . . . . . . . . . 1,700 Short Bros . . . . . . . . . . . . . . . . . . . . . . .429 Total 15,789 -----------------------------------------------------------------
Additional reporting by Diane Coyle and Helen Kay.
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