Britain's economy sagging, despite uplift of the royal wedding

As red, white, and blue flags and bunting go up all over London for the royal wedding, Britain's economy is still flashing distress signals. And the man who speaks for British industry sees bad economic weather ahead: low output, unemployment over 3 million, and "no sign at all of an upturn" in production.

Not that tall, outspoken Sir Terence Beckett, secretary- general of the Confederation of British Industries (CBI) is totally pessimistic. He is not.

"Britain," he told a group of US correspondents over lunch, "remains by and large a moderate a moderate people in spite of the recent riots and so on. We are a politically stable country. . . . I have a lot of confidence. We are the only major industrial country self-sufficient in energy. We have financial and banking skills."

In their penchant for self-criticism, British people have sometimes overlooked their own flexibility, in switching the bulk of British trade away from the US in recent years and into Europe and the European Community.

Yet Sir Terence was frank, even bleak, about what lies ahead. He was critical of the Conservative government of Prime Minister Margaret Thatcher, who came to office on a pro-business platform. He gave her credit for some assistance, but called on her for much more.

He also spotlighted a basic disagreement here on how to create jobs urgently needed around the country (he predicted 3 million out of work by September) and in riot-hit inner cities.

Mrs. Thatcher's Cabinet is divided over how best to put young people to work at a time when youth unemployment is as high as 50 percent in some areas of Liverpool, Manchester, and London.

Some ministers want to expand the government's Job Opportunities Program to the tune of at least another L600 million ($1.12 billion) a year. The program is already subsidizing training for some 440,000 young people for a year at a time, but many youngsters have now left it after 12 months and can find nothing else.

Mrs. Thatcher's personal advisers, however, see the answer in lowering the wages industry now has to pay young people under trade union agreements.

This plan would try to persuade companies to hire more young people by offering financial incentives, such as reduced government taxes of various kinds.

Sir Terence and the CBI say the latter plan might produce some jobs, but not many. The basic problem, they say, is that most British industry is still operating well under capacity.

"We're like an athlete trained to run but not given the chance to run," he said at one point.

Industry has slimmed down, toughened up, and readied itself to take advantage of a world upturn when it comes, he said. But it has not yet come. It is not in sight. Until it is, government will have to spend more in inner cities, perhaps to put youngsters to work on building new housing.

To avoid adding to inflation, government will have to cut its own costs by reducing the huge staffs that handled pension, social secu rity, and health paperwork.