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09Aug91 UK: EDITORIAL COMMENT - BUILDING EMPLOYERS CONFEDERATION CALLS FOR RELIEF FROM HIGH INTEREST RATES.

With the dire predictions of continuing recession and mounting job losses from the Building Employers Confederation this week comes a familiar refrain. Give us some relief from high interest rates, the BEC says.This is not the first time the BEC had made this demand; nor is construction the only industry to have called on the Government to bring interest rates down more quickly. Virtually every organisation across industry has made similar noises.The trouble with the demands for interest rate cuts is that they are quite easily rebuffed. The Government can point out that we have had six - or is it seven? - half point reductions already this year, and the likelihood is that there are more to come. By the standards of the past few years, present interest rates are not abnormally high and they are failing. Just be patient, the reply comes. Things are getting better. Hang on in there.Now you don't have to be Norman Lamont to see that the Government's response has some force. The flaw in its argument, though, is that recession shows no sign of abating even though the cost of borrowing is less.But there is a problem here for industry, too. Events of the past few months suggest the link between interest rates and overall economic performance, which seemed so strong as we drifted down into recession, may not apply to the pick-up out of recession.In this case, is the industry asking for the wrong thing in stressing lower interest rates as the key to recovery?There are, in practice, two more direct and more urgent problems that companies face in this recession. One is lack of demand; the other is lack of confidence.No one would expect the Government to do much about lack of demand: it has never spent money for the sake of it, and is unlikely to change style now by embarking on a massive artifically-created programme of public works.But it might do more to inject confidence back into the economy as a whole. At present, only the Government seems confident that the recession is coming to an end - and it appears reticent about backing its confidence with action, and giving the economy the kick-start it needs.It's here that interest rates may come into the reckoning. If the Government won't, for whatever reason, bring forward the infrastructure investments which everyone knows have to be made sooner or later, then it could try to bring some activity and enthusiasm back to the economy by a rather less timid approach to interest rates.A full point now, or even two points, might well be a shot in the dark. But it might equally prove to be the shot in arm the economy needs.