TNAG-1159-FCO40-1439-Visit-by-Margaret-Thatcher--UK-Prime-Minister--to-Hong-Kong--1982 — Page 59

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DSR 11C

But, to be frank, Britain has created some of her own

problems. No economy exporting almost a third of its

output can afford to neglect competitiveness.

But that

is what we did. Our unit labour costs rose too high.

The reason was the all too familiar one of wage rises

not backed by productivity gains.

Our relative lack of competitiveness, however, goes

back much further. It has been due to a number of

causes. Failure of productivity to rise as fast as

that of our competitors over many years is a major one.

That poor productivity record has varied roots, in,

for example, the spread of restrictive labour practices

preventing investment being used efficiently, in an

inadquate stimulus to innovation and technological

change, and in a failure to apply changes in

production techniques.

But we have turned the corner. We are firmly on the

way to recovery. I do not want to bore you with

statistics; just let me say that productivity and

competitiveness are improving and, most important,

the annual rate of inflation is now in single figures

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