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Cautious Analysts Temper Major's Economic Tidings

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EVEN before government statistics confirmed the fact, the happy sound of cash registers was relaying the message: Britain's longest recession since the 1930s was over at last.

But rejoicing is being tempered by warnings from economists and captains of industry that the recovery may be short-lived. Official confirmation of the "green shoots" of recovery came in the form of Treasury data showing that in the last 12 months, economic growth was a real 0.6 percent. The figures supported the views of retailers who reported their best sales figures since 1989.

The glad tidings enabled John Major, the prime minister, to say that "the pendulum is swinging towards growth, and industry is facing unparalleled opportunities." Although analysts generally endorse Mr. Major's claim that the recession is over, most think the recovery is fragile.

Some of the sharpest warnings have come from business leaders who are imploring Major and his ministers to safeguard them against another recession. Peter Morgan, director general of the influential Institute of Directors (IOD), said on April 27 that there was a risk of Britain reentering the "dreary pattern of economic decline" unless government and industry work more closely together.

Nigel Pain of the National Institute of Economic and Social Research supported Mr. Morgan's cautious view: "So far, so good. But the medium-term prospect is clouded, and much will depend on the policies the government follows."

Many economists hold that Norman Lamont, chancellor of the exchequer, must take early steps to slash the British pounds50 billion ($78.7 billion) deficit (9 percent of gross domestic product) projected in his March 16 budget. Others say Mr. Lamont, in addition to cutting public spending, will have to order another increase in taxes beyond his March budget's British pounds17.5 billion ($27.5 billion) hike if public sector borrowing is to be brought under control. Ruth Lea, chief economist in London of Mit subishi Bank, said Lamont would be "wise to plan for possible additional tax measures" when he delivers his next budget in the autumn. "Britain's fiscal position is more perilous than it has ever been in peacetime," wrote The London Times.


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