Thatcher stands firm despite signs of mounting recession

Britain's car industry is fast becoming the most obvious symbol of the nation's economic decline as recession deepens. The government is well aware of the warning signals emanating from the sagging automobile industry and other areas of the economy, but it is reluctant to sanction any major effort to reverse recessionary trends by large-scale state intervention.

Prime Minister Margaret Thatcher, backed by monetarist senior ministers, continues to hope that high interest rates, a shaking out of unproductive investment, and heavy cuts in state spending will put the economy right in the long-run.

But this hope threatens to collide with demands that more state money be pumped into industry. Top economic experts at BL (formerly British Leyland) are preparing to tell Mrs. Thatcher that the company may not survive the current recession without a fresh injection of cash.

BL has already had $:1 billion ($2.3 billion), but the influential Financial Times has stated in an editorial that a case exists for another government handout very soon. BL now plans putting nearly 5,000 car workers on various forms of short time and will lay off 8,000 workers in commericial vehicle plants throughout September and October.

Across the motor industry, short-time work has begun to harden into normal practice. The French-owned Talbot company has ordered its British plants to work a two-day week until further notice.

Ford is taking similar measures, with a call for 2,700 voluntary redundancies as an additional step to cope with intensifyin economic pressures. Some 30,000 Vauxhall workers have been told that they can expect to stay on short time until at least the end of the year.

At the root of the troubles are two sets of statistics that make dismal reading for managers and economists alike: British car sales are a third lower than last year; and import penetration, mainly from Japan, is still rising.

The twin trends have sparked a price-cutting war among vehicle manufacturers. British Leyland this week announced reductions of up to $:500 ($1,150) on a wide range of models.

The carmakers are planning a new appeal to Mrs. Thatcher to curb imports from Japan.

It is not only in the vehicle industry that symptoms of recession are multiplying. The giant chain of Woolworth's High Street retail shops has published figures showing its profits plunging from $:16 million ($36.8 million) to a bare $:250,000 ($575,000).

Woolworth's has always prided itself on profitability, and top managers admit they are severely depressed by performance in recent months.

Retail experts predict that the autumn will bring a period of "never-ending" sales as competing store chains try to induce customers to buy.

A price battle, comparable to that in the car industry, is already being fought in High Streets throughout Britain. Interest-free credit, special offers , and extended shopping hours are becoming common as the struggle intensifies.

House of Fraser, owners of Harrod's and 120 department stores, has warned goods suppliers that no price increases will be accepted until next year. The aim is to stop spiraling retail prices in their tracks for six months.

Other signals being flashed from within an anxious business community include:

1. A decision by British Steel to confirm closure of the Consett works in Durham at the end of September, despite workers' protests.

2. A 4.5 percent fall in the overall output of British manufacturing industry.

3. Heavy pressure on the Department of Employment by firms seeking financial aid to enable them to keep workers on short time rather than dismiss them. Official outlay from the aid fund is expected to double to over $:40 million ($ 92 million) in coming months.