Bolstered by a "new realism," Great Britain has recovered its "confidence and self-respect" and is beginning a march to economic recovery, 'according to the new British ambassador, Peter Jay.

In an upbeat assessment to the National Press Club yesterday, Jay said: "Although you can't fine-tune the re-entry into reality, I give you fair warning that we're 'back in business' in Britain."

Jay, who until has appointment was the economics editor of the Times of London, said that Labor Government policy had brought the budget deficit under control, reversed the collapse of the British stock market and, with the help of North Sea oil, would produce a balance of payments surplus.

With the pound sterling once again strong, he said that "British reserves are so large as to be embarrassing."

In response to a question, Jay said that none of this is inconsistent with his earlier writings which questioned the basic stability of Great Britain and other western democracies. The persistence of unemployment and inflation still requires "fundamental rethinking" of oil theories of capital-labor relationships, he said.

But he based his relative optimism on the fact that, "having touched bottom first, we also have thought harder about the kind of changes that are needed." On the other hand, he cautioned, "the problems of decades" won't be solved overnight.

Jay claimed that the "new leadership" in Great Britain, one that "prefers facts to fancies," has to desire "to go back to an unmanageable past." He cited the government's stand against wage demands by assistant air traffic controllers at Heathrow airport as an example of a tough new attitude.

He said this represented a "change of heart" from the early 1970s. "In 1973 to 1975. we came to the brink, and we didn't like what we saw," Jay said. Part of the new realism includes giving up "the illusory role of global power," although there is a willingness to help in Third World problems" without any lingering pretensions beyond our means," he added.

Jay succeeded the popular Peter Ramsbotham, now governor general of Bermuda. Jay's appointment created a minor storm in Great Britain because the ex-journalist, who had no prior diplomatic experience, is the son-in-law of prime Minister James Callaghan.

Asked yesterday how his "role" would differ from Ramsbotham's. Jay praised his predecessor as "one of the greatest ambassadors," and added: "I shall do my own thing, and hope it will be successful."