HC Deb 06 April 1976 vol 909 cc233-5

In the United Kingdom we have inevitably shared in the world recession. The main fall in activity came between the third quarters of 1974 and 1975, when our gross domestic product fell about 4½ per cent. This was an exceptional fall by our own past standards, though not by comparison with recent experience in some other industrial countries like Germany and the United States. The fall in our activity was due mostly to a fall in exports and an exceptionally large rundown of stocks, and since both have a high manufacturing content, manufacturing production fell even more sharply than GDP—by 9 per cent. over the same period. Personal consumption fell a good deal less.

This deep recession inevitably led to a big increase in unemployment, which reached 1.2 million—on a seasonally adjusted basis—at the beginning of this year. This level disturbing though it is, was no worse than what many other industrial countries experienced and a good deal less than in the United States. Moreover, the development areas have suffered comparatively less than in previous recessions: the gap between the United Kingdom average and unemployment rates in Scotland, Northern Ireland and Northern England has been reduced.

The tide has now turned and output in the United Kingdom is rising. But the extent of the recovery so far is uncertain. The increase in gross domestic product between the third and fourth quarters of last year was probably about 1 per cent. though the expenditure figures suggest a rather faster rate of expansion. Exports of goods and services rose by 5 per cent. in volume between these two quarters, there was a moderate rise in personal consumption and the fall of stocks was much reduced.

A moderate rate of recovery probably continued into the first quarter of this year. Industry is now rebuilding its stocks. Survey information suggests that exports are on a strong upward trend and business confidence is improving steadily. Up to the fourth quarter of last year manufacturing investment was falling, but this is to be expected at the present stage of the cycle and surveys of investment intentions suggest an upturn in investment later this year.

The outlook for unemployment now seems distinctly brighter. Recent monthly figures have shown an impressive change from increases averaging over 40,000 a month—seasonally adjusted—throughout the latter half of last year to a rise of 22,000 in February and a fall of 6,000 in March.

But, encouraging though this is, we cannot be at all certain whether they signal a definite turn-round or not. In the past there has often been a long time lag before a recovery in output has led to a firm downward trend in unemployment. Some of the improvement in the unemployment figures must be due to the special measures I announced in September, December and February, although it is not possible to identify their specific effects. If we judge solely by the movement of GDP in the last few months, it may still be too soon to expect the trend in unemployment to be reversed. But some of the indicators suggest that a rapid improvement may already be under way. I would mention in particular the steady increase in the number of notified vacancies over the last three months, as well as the large increase in our imports of industrial materials. So nevertheless we would be wise to wait some months longer before reaching a firm conclusion on the basic trend.