British upturn loses some steam

By , Staff correspondent of The Christian Science Monitor

As cheerful but beleaguered John Allan can tell you, running a small hardware business in Britain isn't easy these days, even in the relatively prosperous southeast.

What he has to say, between customers in his small and crowded Surrey shop, illustrates some of the reasons that Britain's economic climb out of recession, like America's, has begun to slow down.

The Thatcher government still pins its hopes on reduced public spending, more exports (currently helped by a weak pound, which makes British goods cheaper abroad), and more growth in the United States, whose economy British officials see as the engine that can - federal deficits and interest rates permitting - pull Europe up with it.

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In Washington, officials like Commerce Secretary Malcolm Baldrige claim the US slowdown is welcome, to avoid pushing interest rates still higher.

In Britain, however, speedier growth is urgently needed to lower unemployment , which has been running at record levels.

Many British, even those with good jobs and income, are still careful about spending. They comb discount and chain stores rather than conventional small shops with high overheads.

''My paint trade has gone,'' says Mr. Allan as he sells a hammer. ''People can now buy cheaper at a discount store than I can buy wholesale. Wholesalers say they can't cut profit margins any more. . . . My lawn mower trade has gone for the same reasons. . . . People walk in and out of the shop all day, but many of them only want a washer or something small. . . .

''Frankly, I might have had to close up altogether if it wasn't for the toys.''

Shelves and counters of brightly colored toys now vie for space with hammers, nails, and ladders. Despite shoplifting (25 children caught in six months, and two adults nabbed while switching price tickets), the toys have helped.

But John Allan, like the British economy, has a long way to go.

British shoppers in general are beginning to spend less, according to Colin Paterson, chairman of the Retail Consortium, which represents most British retailers. Nationwide, retail spending fell 0.5 percent in July.

On a wider front, the voice of United Kingdom industry, the Confederation of British Industries (CBI), has scaled back its estimate of how fast the U.K. economy will grow this year. The CBI also sees growth tailing off early in 1984.

Another prominent forecaster, the National Institute of Economic and Social Research (NIESR), expects a similar lack of growth.

New figures on output and spending just issued by the government's Central Statistical Office indicate that recovery halted in the second quarter of this year.

While there is controversy about how U.K. economic statistics are drawn up, and whether short- or long-term indicators are more accurate, the general picture is one of an upturn running out of steam:

Manufacturing output was down 1.1 percent and industrial output as a whole was off 1.7 percent in June.

Disposable income rose only 2 percent in the first half of the year. Capital investment for the same period was down 1.5 percent over the last half of 1982. The index of so-called ''longer leading indicators,'' used as a guide for the coming year, has stayed flat for four months.

Eight London stockbroker firms have just reported that growth could be as low as 1 percent next year. And the CBI had been forecasting a 2.5 percent growth. But now, with exports declining and interest rates still high, the CBI's economic situation report has revised its estimate downward to less than 2 percent. Even the Treasury doubts that growth this year can reach 2.5 percent.

Unemployment is also worrisome.

Both the CBI and NIESR see it rising 100,000 from the current official rate of 3.1 million by the end of next year. Government officials concede it will keep growing before any significant improvement can be seen.

Despite these negative figures, the economic picture is not all bad. On the job front, August unemployment figures showed a drop to 2.94 million. It was the first time the figure had fallen since 1979. Yet, Employment Secretary Norman Tebbit was cautious, saying that one month's figures don't make a trend.

And spending is continuing. Auto sales in August set a record. Some big company prgfits are higher, including British Petroleum's.

Productivity is also on the rise. Output per worker jumped 5.8 percent between 1980 and 1982, higher than Japan and West Germany in the same period.

The Thatcher government's most notable achievement has been lowering inflation to less than 5 percent a year. The CBI and the NIESR see this inching up to 6 percent by December and to 7.5 percent by the end of 1984.

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