The government has reacted with relief to news that Britain’s economy grew by 0.2% in the first three months of this year, and declared the longest recession since the 1930s officially over.
The figures, from the Central Statistical Office, show a 0.2% rise in gross domestic product (GDP), and a 0.6% increase in activity in the onshore economy, excluding oil and gas production.
It’s the first sign of growth in the economy for over two years. The recession has been longer, but less severe, than the last one in the 1980s. Output has fallen by 3.9%, compared with a 5.5% fall last time.
Prime Minister John Major called on industry to make the most of the “unparalleled opportunities” offered by the combination of low inflation and interest rates, and a competitive exchange rate.
The Chancellor, Norman Lamont, was also upbeat, saying the figures were “the best evidence so far that the economy is recovering across a broad front.”
In a BBC interview, Mr Lamont said Britain was starting to see the reward of policies that the government had been pursuing during the past few years.
The Institute of Directors, though, disagreed with the Chancellor on the reasons for the upturn. Their latest survey said improved performance was due to Britain’s departure from the European exchange-rate mechanism (ERM), a policy decision forced on the government.
Black Wednesday
The pound was driven out of the ERM last September by frantic currency speculation, on what became known as Black Wednesday.
In a catastrophic day for the government’s policy on Europe and the economy, Mr Lamont was forced to spend billions in an attempt to prop up the pound, which failed as it dropped below its minimum level in the ERM.
He had no choice but to devalue and pull out of the ERM.
The Shadow Chancellor, Gordon Brown, greeted the figures cautiously, saying he hoped the recession was over, but warning that skills shortages and an investment gap with the UK’s competitors could stymie future growth.
Courtesy BBC News
In context
The British economy began improving steadily, and has not been in recession since.
Norman Lamont’s career, however, never fully recovered from Black Wednesday. A month after announcing the end of the recession, he had resigned.
In his resignation speech to the Commons, he launched a vitriolic attack on John Major’s leadership. Famously, he accused the government of being “in office, but not in power”.
He never spoke to John Major again, and became one of his fiercest critics from the backbenches.
The Black Wednesday debacle is also credited with destroying confidence in the Conservatives’ ability to manage the economy. It contributed to their defeat in the 1997 general election.
John Major refused to include his former Chancellor in his resignation honours list in 1997. Mr Lamont was made a peer by John Major’s successor, Labour Prime Minister Tony Blair, in 1998.
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