Cylchgronau Cymru

AN ECONOMIC SURVEY THE BRITISH EXPERIENCE The last few months of 1990 brought overwhelming evidence that the British economy was in recession. Formal recognition, however, had to await the publication of figures in early 1991 which confirmed 'two successive quarters of falling gross domestic product'. This recourse to semantics together with official criticisms of the Jeremiah voices of doom and gloom seemed to fly in the face of falling output, declining investment, low profitability, a record number of business failures and rapidly increasing unemployment. The initial downturn in the economy could be traced back to late 1989 as the personal sector, largely in the housing market, began to respond to the high interest rate policy which had seen the base rate rise to 15 per cent. Southern regions of England were hit hardest and earliest, with the service, construction and property sectors, which had experienced strong expansion in the second half of the 1980s, suffering the most. Other sectors and regions experienced only a relative slowdown initially as buoyant export markets compensated for reduced domestic demand, but by the end of the year cutbacks, closures and job losses had become widespread. The general uniformity of recessionary effects contrasted with the recession of the early 1980s, in which the manufacturing sector and the industrial heartlands had borne the brunt. During the autumn an appreciation that inflation was staying stubbornly high and that the authorities were reluctant to cut interest rates produced a growing business pessimism. The severe downturn in demand, together with the commitment to finance high borrowing undertaken in the late 1980s, combined to create large financial deficits. These problems were compounded by other pieces of 'bad news' which accumulated during the second half of the year, namely the developing crisis in the Gulf, the slowdown in world trade, and various difficulties facing the government, particularly with respect to the Community Charge and European issues. The general retrenchement in the corporate sector contributed to the highest level of company failures on record 11. WALES IN 1990: Dennis Thomas