ABSTRACT
The recession of 1979-81 had a devastating effect on British Leyland’s performance. A high exchange rate policy reduced export sales and the high interest rates depressed the home market. The effect was to leave the company requiring further subsidies from government. In May 1980 the BL board decided to give the Prime Minister and senior government officials forewarning of the need for further aid at a Downing Street dinner. Following this there was significant support within the Conservative party for closing down the company. At this stage there was no real privatization programme; BL had lost £535.5m in 1980 and it was inconceivable that during a worldwide recession another car-maker would have bought large parts of the business. Nevertheless, a policy to declare the company insolvent was gathering pace amongst a substantial number of backbenchers on the Conservative Industry Committee, in spite of BL’s sizeable contribution to the UK economy (Table 3.1). It is a measure of government indecision at the time that BL had to expend considerable energy persuading the Cabinet that this course of action would involve punitive financial costs (Edwardes, 1983:228).
