The Global Crisis: United Kingdom - Still steady in choppy seas: Don't be too terrified by the R-word

ONE OF the best indicators of an approaching recession is simply the number of times the word is used in the newspapers. The R-word count has shot up since last summer, foreshadowing official figures showing that growth slowed almost to a standstill in the final three months of last year.

Yet there is no better indicator of an overheating economy than "help wanted" signs in shop windows. In effect, employers are so desperate for staff that they are pleading with any passing stranger to come in and take a job. The south-east of England and a handful of other hotspots are still in this happy state.

This simultaneous boom and bust is mirrored in other ways. Manufacturing industry is laying off workers and cutting output; the computer industry has had to double salaries to fill some posts. Exporters have been hit by the double whammy of the strong pound and the collapse of some overseas markets in the wake of financial crisis. But businesses selling to the domestic market are quietly satisfied with business.

Some retailers face such stiff competition that they can only shift their stock by slashing prices, whereas services such as restaurants, hairdressers and insurers have been raising their charges. And that bellwether of consumer confidence, the housing market, veers between price increases of 25 per cent a year in chi-chi parts of London and falling prices in depressed northern towns.

There is no doubt at all that the British economy has slowed sharply. Successive interest rate increases by the Bank of England's monetary policy committee between May 1997 and June last year nipped in the bud an out- and-out boom .

The process should have started earlier, but was delayed by the election campaign - it would take a brave or foolhardy Chancellor to put up mortgage costs at that stage of the political cycle. Critics argue that, having started late, the interest rate rises then went on too long. The eight men and one woman on the Bank's monetary committee are out of touch with the real economy, according to industry and unions alike in the manufacturing sector.

When Eddie George, the Governor, learnt that the Bank was to get the power to set interest rates, the prospect of demonstrations by union members in Threadneedle Street was probably the last thing on his mind. Yet he can argue that even if interest rates are not quite at the right level, they are pretty close. The peak rate of 7.5 per cent in June was less than half as high as last time around, and the level has fallen sharply since then. Weighing up this performance by his formal inflation target, it looks pretty impressive so far. The underlying measure has been at 2.5 per cent, the target, or close to it for more than six months.

Most people care more about what happens to growth and employment prospects than to inflation, of course, no matter how often Gordon Brown spells out his message that low stable inflation is what will deliver jobs and growth. Yet on this front, so far, interest rates and the government's budget policy compare well with the past. If the six-month period from October to March is as bad as the downturn gets, it will scarcely deserve to be called a recession. The Chancellor's hands-off approach to tax and spending policy has attracted criticism from those who think he should have used his Budgets to boost growth. But even though the Treasury's last forecast will prove to be somewhat over-optimistic, Mr Brown remains resolutely upbeat about pros-pects for the economy this year.

As far as macroeconomic policies go, it is fair to say that, at a minimum, the UK has suffered from much bigger mistakes in the past. Of course, this does not mean that we are safe from recession after all. Things well beyond the control of Gordon Brown and Eddie George, from a slump in Brazil to a Wall Street crash, could have knock-on effects that would plunge the UK economy into a far more serious downturn.

And if global waters do prove to be too turbulent, the Government might prove to have made the biggest mistake of all in not joining the euro from the start. If it is a small craft tossed on waves between supertankers, it will not help that plucky HMS Britain is being steered better than ever before