Worst recessions in British history
Image (Left and overlay): Shutterstock.com | Above: (Left) The Royal Exchange Building in London (Right) Marchers from the Jarrow Crusade, a protest against the unemployment and poverty suffered in Jarrow following the world recession of 1929
The world continues to reel from the effects of the global coronavirus pandemic that began back in 2020. The threat of recession once again looms in the UK as the economy teeters on the edge.
It’s not the first time the country has faced financial hardship but before we dive into the annals of history, let's tackle some key questions concerning a recession.
What is a recession?
Normally a country’s economy grows as the value of the goods and services it produces (Gross Domestic Product – GDP) increases. However, if their value falls for two quarters in a row that is defined as a recession – an indication that a country’s economy is struggling.
Are we currently in a recession?
No, the last time the UK went into recession was in 2020 during the height of the COVID-19 pandemic. It lasted for six months. However, some analysts suggest we may have already entered one.
Are we going back into recession?
Yes, according to the Bank of England, which has already indicated that the UK might be in one, the country will have slipped into another recession by the end of 2022 and they are predicting it’ll be a long one. The main driving forces are the energy crisis, decreases in income, and rising inflation.
1. The Great Slump (1430-80)
The 15th-century Great Slump was one of the first 'credit crunches' in British history. Driven by shortages of silver which led to deteriorating coinage, medieval English lenders began rationing credit. The subsequent crisis spread throughout the country with the economy not fully recovering for over 50 years.
2. The Great Frost (1709)
An extraordinarily cold winter in Europe in 1708-09 brought commerce across the continent to a grinding halt. In the UK, the Thames froze clean over becoming a giant ice rink to the pleasure of many Londoners. However, excitement soon turned to dread, as the cold snap dragged on for three months. When it finally thawed, widespread flooding wreaked havoc on the largely agricultural economy. As crops failed, grain prices sky-rocketed and communities across the country faced starvation. It took 10 years for the economy to bounce back from the Great Frost of 1709.
3. The British Credit Crisis of 1772
Described as the first modern banking crisis faced by the Bank of England, the British credit crisis of 1772-73 originated in London before spreading to both Scotland and the Dutch Republic. The crisis started after Alexander Fordyce - a partner in the London bank of Neale, James, Fordyce and Down – lost £300,000 (approx. £51 million in today’s money) shorting East India Company stock. The bank folded and it wasn’t long before eight more in London had gone under. 20 more followed suit in Europe and practically every private bank in Scotland also went bankrupt.
4. The Long Depression (1873-96)
Although the impacts of the economic recession known as the Long Depression were worldwide, the UK is often considered to have been the hardest hit. It all started after the collapse of the Vienna Stock Exchange in 1873. That event heralded a period of economic stagnation for Britain, leading to a dramatic fall in exports and an increase in unemployment. The recession lasted 23 years driven by a variety of factors including increased speculative spending, demonetisation of silver and the arrival of new technologies.
5. Depression of 1920-21
Although Britain had emerged victorious from the Great War in 1918, it had come at a severe cost both in human lives and in financial terms. However, the country enjoyed a period of economic boom straight after the war as private capital pent-up over four years of conflict was invested into the economy. It didn’t last though as inflation surged and exports fell as the rest of the world continued to suffer in a recession, driven by the effects of WWI as well as the Spanish Flu Pandemic of 1918.
6. The Great Depression (1929-33)
The origins of the Great Depression are rooted in the United States stock exchange. After the Wall Street Crash of 1929 - an event caused by years of speculative buying - the western world plunged into the most severe depression ever experienced. British exports plummeted as the demand from America all but dried up leading to widespread unemployment, especially in industrial areas. However, the country suffered less than America and Germany since the 20s had already been unkind to the British economy. In 1931, things started to look up after the pound was devalued and interest rates began to fall, boosting house building and industry.
7. Early 1980s Recession (1980-81)
Caused by the 1979 energy crisis – an event triggered by the disruption of the global oil supply due to the Iran Revolution of 1979 – levels of inflation reached double-digits in many countries. In the UK, high levels of unemployment coupled with widespread strikes (known as the Winter of Discontent) had left newly appointed Prime Minister, Margaret Thatcher, with her work cut out. Although she raised interest rates to tackle inflation, it continued to rise soon reaching 22%. Cheap imports led to the closure of many factories and coal pits, leaving unemployment at levels not seen for half a century.
8. Global Financial Crisis (2008-9)
Known as the Great Recession, the global financial crash of 2008 is believed by many to have been the worst economic disaster since the Great Depression. Driven primarily by the housing market crash in America, it didn’t take long before the effects hit Britain, leading to a massive run on the bank Northern Rock in late 2007. A year later, investment bank Lehman Brothers went under officially triggering the global crisis. The British recession lasted five quarters and was the deepest one since WWII. Unemployment rose to over 2.6 million people and manufacturing output declined. The recession stubbornly impacted the British economy for the next 10 years heralding the ‘age of austerity’.
