Economic history of the United Kingdom

Exports

Especially within the British empire, exports started to increase heavily in this period. Mostly privately owned companies traded with the colonies in the West indies, Northern America and India.^[11]

The Company of Merchant Adventurers of London brought together London's leading overseas merchants in a regulated company in the early 15th century, in the nature of a guild. Its members' main business was the export of cloth, especially white (undyed) woollen broadcloth. This enabled them to import a large range of foreign goods.^[12][13]

Wool industry

Woollen cloth was the chief export and most important employer after agriculture. The golden era of the Wiltshire woollen industry was in the reign of Henry VIII. In the medieval period, raw wool had been exported, but now England had an industry, based on its 11 million sheep. London and towns purchased wool from dealers, and send it to rural households where family labour turned it into cloth. They washed the wool, carded it and spun it into thread, which was then turned into cloth on a loom. Export merchants, known as Merchant Adventurers, exported woollens into the Netherlands and Germany, as well as other lands. The arrival of Huguenots from France brought in new skills that expanded the industry.^[14][15][16]

Government intervention proved a disaster in the early 17th century. A new company convinced Parliament to transfer to them the monopoly held by the old, well-established Company of Merchant Adventurers. Arguing that the export of unfinished cloth was much less profitable than the export of the finished product, the new company got Parliament to ban the export of unfinished cloth. There was massive dislocation marketplace, as large unsold quantities built up, prices fell, and unemployment rose. Worst of all, the Dutch retaliated and refused to import any finished cloth from England. Exports fell by a third. Quickly the ban was lifted, and the Merchant Adventurers got its monopoly back. However, the trade losses became permanent.^[17]

Diets

The diet depended largely on social class. The rich ate meat—beef, pork, venison—and white bread, the poor ate coarse dark bread, with a bit of meat perhaps at Christmas. Everyone drank ale—water was often too impure to drink. Fruits and vegetables were seldom eaten. Rich spices were used by the wealthy to offset the smells of old salted meat. Vegetables and fruits were not popular. The potato was not part of the diet. The rich enjoyed desserts such as pastries, tarts, cakes, and crystallized fruit, and syrup.^[18]

Among the rich private hospitality was an important item in the budget. Entertaining a royal party for a few weeks could be ruinous to a nobleman. Inns existed for travellers but restaurants were not known.

Both the rich and the poor had diets with nutritional deficiency. The lack of vegetables and fruits in their diets caused a deficiency in vitamin C, sometimes resulting in scurvy.

Trade and industry flourished in the 16th century, making England more prosperous and improving the standard of living of the upper and middle classes. However, the lower classes did not benefit much and did not always have enough food. As the English population was fed by its own agricultural produce, a series of bad harvests in the 1590s caused widespread distress.^[19]

In the 17th century the food supply improved. England had no food crises from 1650 to 1725, a period when France was unusually vulnerable to famines. Historians point out that oat and barley prices in England did not always increase following a failure of the wheat crop, but did do in France.^[20]

Poverty

A woodcut from circa 1536 depicting a vagrant being punished in the streets in Tudor England.

About one-third of the population lived in poverty, with the wealthy expected to give alms to assist the impotent poor.^[21] Tudor law was harsh on the able-bodied poor i.e., those unable to find work. Those who left their parishes in order to locate work were termed vagabonds and could be subjected to punishments, including whipping and putting at the stocks.^[22][23]

The trading nation

The 18th century was prosperous as entrepreneurs extended the range of their business around the globe. By the 1720s Britain was one of the most prosperous countries in the world, and Daniel Defoe boasted:

we are the most "diligent nation in the world. Vast trade, rich manufactures, mighty wealth, universal correspondence, and happy success have been constant companions of England, and given us the title of an industrious people."^[24]

While the other major powers were primarily motivated toward territorial gains, and protection of their dynasties (such as the Habsburg and Bourbon dynasties, and Prussia's House of Hohenzollern), Britain had a different set of primary interests. Its main diplomatic goal (besides protecting the homeland from invasion) was building a worldwide trading network for its merchants, manufacturers, shippers and financiers. This required a hegemonic Royal Navy so powerful that no rival could sweep its ships from the world's trading routes, or invade the British Isles. The London government enhanced the private sector by incorporating numerous privately financed London-based companies for establishing trading posts and opening import-export businesses across the world. Each was given a monopoly of trade to the specified geographical region. The first enterprise was the Muscovy Company set up in 1555 to trade with Russia. Other prominent enterprises included the East India Company, and the Hudson's Bay Company in Canada. The Company of Royal Adventurers Trading to Africa had been set up in 1662 to trade in gold, ivory and slaves in Africa; it was reestablished as the Royal African Company in 1672 and focused on the slave trade. British involvement in the each of the four major wars, 1740 to 1783, paid off handsomely in terms of trade. Even the loss of the 13 colonies was made up by a very favorable trading relationship with the new United States of America. British gained dominance in the trade with India, and largely dominated the highly lucrative slave, sugar, and commercial trades originating in West Africa and the West Indies. Exports soared from ₤6.5 million in 1700, to ₤14.7 million in 1760 and ₤43.2 million in 1800.^[25] Other powers set up similar monopolies on a much smaller scale; only the Netherlands emphasized trade as much as England.^[26][27]

Most of the companies earned good profits, and enormous personal fortunes were created in India.^[28] However, there was one major fiasco that caused heavy losses. The South Sea Bubble was a business enterprise that exploded in scandal. The South Sea Company was a private business corporation supposedly set up much like the other trading companies, with a focus on South America. Its actual purpose was to renegotiate previous high-interest government loans amounting to ₤31 million through market manipulation and speculation. It issued stock four times in 1720 that reached about 8,000 investors. Prices kept soaring every day, from ₤130 a share to ₤1,000, with insiders making huge paper profits. The Bubble collapsed overnight, ruining many speculators. Investigations showed bribes had reached into high places—even to the king. His chief minister Robert Walpole managed to wind it down with minimal political and economic damage, although some losers fled to exile or committed suicide.^[29][30]

The Age of Mercantilism

The basis of the British Empire was founded in the age of mercantilism, an economic theory that stressed maximizing the trade outside the empire, and trying to weaken rival empires. The 18th century British Empire was based upon the preceding English overseas possessions, which began to take shape in the late 16th and early 17th century, with the English settlement of islands of the West Indies such as Trinidad and Tobago, the Bahamas, the Leeward Islands, Barbados, Jamaica, and Bermuda, and of Virginia, one of the Thirteen Colonies which in 1776 became the United States, as well as of the Maritime provinces of what is now Canada. The sugar plantation islands of the Caribbean, where slavery became the basis of the economy, comprised England's most lucrative colonies. The American colonies also used slave labour in the farming of tobacco, indigo, and rice in the south. England, and later Great Britain's, American empire was slowly expanded by war and colonization. Victory over the French during the Seven Years' War gave Great Britain control over what is now eastern Canada.

Mercantilism was the basic policy imposed by Britain on its colonies.^[31] Mercantilism meant that the government and the merchants became partners with the goal of increasing political power and private wealth, to the exclusion of other empires. The government protected its merchants—and kept others out—by trade barriers, regulations, and subsidies to domestic industries in order to maximize exports from and minimize imports to the realm. The government had to fight smuggling—which became a favorite American technique in the 18th century to circumvent the restrictions on trading with the French, Spanish or Dutch.^[32] The goal of mercantilism was to run trade surpluses, so that gold and silver would pour into London. The government took its share through duties and taxes, with the remainder going to merchants in Britain. The government spent much of its revenue on a superb Royal Navy, which not only protected the British colonies but threatened the colonies of the other empires, and sometimes seized them. Thus the British Navy captured New Amsterdam (New York) in 1664. The colonies were captive markets for British industry, and the goal was to enrich the mother country.^[33]

Manufacturing

Besides woollens, cotton, silk and linen cloth manufacturing became important after 1600, as did coal and iron.^[34]

Coalbrookdale by Night, 1801. Blast furnaces light the iron making town of Coalbrookdale.

In 1709, Abraham Darby I established a coke-fired blast furnace to produce cast iron, replacing charcoal, although continuing to use blast furnaces. The ensuing availability of inexpensive iron was one of the factors leading to the Industrial Revolution. Toward the end of the 18th century, cast iron began to replace wrought iron for certain purposes, because it was cheaper. Carbon content in iron was not implicated as the reason for the differences in properties of wrought iron, cast iron, and steel until the 18th century.^[35]

The Industrial Revolution

In a period loosely dated from the 1770s to the 1820s, Britain experienced an accelerated process of economic change that transformed a largely agrarian economy into the world's first industrial economy. This phenomenon is known as the "industrial revolution", since the changes were far-reaching and permanent throughout many areas of Britain, especially in the developing cities.^[36]

Economic, institutional, and social changes were fundamental to the emergence of the industrial revolution. Whereas absolutism remained the normal form of governance through most parts of Europe, in the UK a fundamental power balance was created after the revolutions of 1640 and 1688. The new institutional setup ensured property rights and political safety and thereby supported the emergence of an economically prosperous middle class. Another factor is the change in marriage patterns through this period. Marrying later allowed young people to acquire more education, thereby building up more human capital in the population. These changes enhanced the already relatively developed labour and financial markets, paving the way for the industrial revolution starting in the mid-18th century.^[37]

Great Britain provided the legal and cultural foundations that enabled entrepreneurs to pioneer the industrial revolution.^[38] Starting in the later part of the 18th century, there began a transition in parts of Great Britain's previously manual labour and draft-animal–based economy towards machine-based manufacturing. It started with the mechanisation of the textile industries, the development of iron-making techniques and the increased use of refined coal. Trade expansion was enabled by the introduction of canals, improved roads and railways. Factories pulled thousands from low productivity work in agriculture to high productivity urban jobs.^[39]

The introduction of steam power fuelled primarily by coal, wider utilisation of water wheels and powered machinery (mainly in textile manufacturing) underpinned the dramatic increases in production capacity. The development of all-metal machine tools in the first two decades of the 19th century facilitated the manufacture of more production machines for manufacturing in other industries. The effects spread throughout Western Europe and North America during the 19th century, eventually affecting most of the world, a process that continues as industrialisation.

According to Max Weber, the foundations of this process of change can be traced back to the Puritan Ethic of the Puritans of the 17th century.^[40] This produced modern personalities attuned to innovation and committed to a work ethic, inspiring landed and merchant elites alive to the benefits of modernization, and a system of agriculture able to produce increasingly cheap food supplies. To this must be added the influence of religious nonconformity, which increased literacy and inculcated a "Protestant work ethic" amongst skilled artisans.^[41]

A long run of good harvests, starting in the first half of the 18th century, resulted in an increase in disposable income and a consequent rising demand for manufactured goods, particularly textiles. The invention of the flying shuttle by John Kay enabled wider cloth to be woven faster, but also created a demand for yarn that could not be fulfilled. Thus, the major technological advances associated with the industrial revolution were concerned with spinning. James Hargreaves created the Spinning Jenny, a device that could perform the work of a number of spinning wheels. However, while this invention could be operated by hand, the water frame, invented by Richard Arkwright, could be powered by a water wheel. Indeed, Arkwright is credited with the widespread introduction of the factory system in Britain, and is the first example of the successful mill owner and industrialist in British history. The water frame was, however, soon supplanted by the spinning mule (a cross between a water frame and a jenny) invented by Samuel Crompton. Mules were later constructed in iron by Messrs. Horrocks of Stockport.

As they were water powered, the first mills were constructed in rural locations by streams or rivers. Workers villages were created around them, such as New Lanark Mills in Scotland. These spinning mills resulted in the decline of the domestic system, in which spinning with old slow equipment was undertaken in rural cottages.

The steam engine was invented and became a power supply that soon surpassed waterfalls and horsepower. The first practicable steam engine was invented by Thomas Newcomen, and was used for pumping water out of mines. A much more powerful steam engine was invented by James Watt; it had a reciprocating engine capable of powering machinery. The first steam-driven textile mills began to appear in the last quarter of the 18th century, and this transformed the industrial revolution into an urban phenomenon, greatly contributing to the appearance and rapid growth of industrial towns.

The progress of the textile trade soon outstripped the original supplies of raw materials. By the turn of the 19th century, imported American cotton had replaced wool in the North West of England, though wool remained the chief textile in Yorkshire. Textiles have been identified as the catalyst in technological change in this period. The application of steam power stimulated the demand for coal; the demand for machinery and rails stimulated the iron industry; and the demand for transportation to move raw material in and finished products out stimulated the growth of the canal system, and (after 1830) the railway system.

Such an unprecedented degree of economic growth was not sustained by domestic demand alone. The application of technology and the factory system created such levels of mass production and cost efficiency that enabled British manufacturers to export inexpensive cloth and other items worldwide.

Walt Rostow has posited the 1790s as the "take-off" period for the industrial revolution. This means that a process previously responding to domestic and other external stimuli began to feed upon itself, and became an unstoppable and irreversible process of sustained industrial and technological expansion.

In the late 18th century and early 19th century a series of technological advances led to the Industrial Revolution. Britain's position as the world's pre-eminent trader helped fund research and experimentation. The nation also had some of the world's greatest reserves of coal, the main fuel of the new revolution.

It was also fuelled by a rejection of mercantilism in favour of the predominance of Adam Smith's capitalism. The fight against Mercantilism was led by a number of liberal thinkers, such as Richard Cobden, Joseph Hume, Francis Place and John Roebuck.

Some have stressed the importance of natural or financial resources that Britain received from its many overseas colonies or that profits from the British slave trade between Africa and the Caribbean helped fuel industrial investment. It has been pointed out, however, that slave trade and the West Indian plantations provided less than 5% of the British national income during the years of the Industrial Revolution.^[42]

The Industrial Revolution saw a rapid transformation in the British economy and society. Previously, large industries had to be near forests or rivers for power. The use of coal-fuelled engines allowed them to be placed in large urban centres. These new factories proved far more efficient at producing goods than the cottage industry of a previous era. These manufactured goods were sold around the world, and raw materials and luxury goods were imported to Britain.

Empire

During the Industrial Revolution the empire became less important and less well-regarded. The British defeat in the American War of Independence (1775–1783) deprived it of its largest and most developed colonies. This loss brought a realisation that colonies were not particularly economically beneficial to the home economy.^[43] It was realised that the costs of occupation of colonies often exceeded the financial return to the taxpayer. In other words, formal empire afforded no great economic benefit when trade would continue whether the overseas political entities were nominally sovereign or not. The American Revolution helped demonstrate this by showing that Britain could still control trade with the colonies without having to pay for their defence and governance. Capitalism encouraged the British to grant their colonies self-government, starting with Canada, which became unified and largely independent in 1867, and Australia, which followed suit in 1901.^[44]

Napoleonic wars

Critical to British success in confronting Napoleon was its superior economic situation. It was able to mobilize the nation's industrial and financial resources and apply them to defeating France. With a population of 16 million Britain was barely half the size of France with 30 million. In terms of soldiers, the French numerical advantage was offset by British subsidies that paid for a large proportion of the Austrian and Russian soldiers, peaking at about 450,000 in 1813.^[45]

Most important, the British national output remained strong. Textiles and iron grew sharply. Iron production expanded as demand for cannon and munitions was insatiable. Agricultural prices soared—it was a golden age for agriculture even as food shortages appeared here and there. There were riots in Cornwall, Devon, and Somerset during the food shortages of 1800-01. Mobs forced merchants to hand over their stocks, as the food was distributed to the hungry by popular committees. Wells concludes that the disturbances indicate deep social grievances that extended far beyond the immediate food shortages.^[46] Overall, however, crop production grew 50% between 1795 and 1815.^[47]

The system of smuggling finished products into the continent undermined French efforts to ruin the British economy by cutting off markets. The well-organized business sector channelled products into what the military needed. Not only did British cloth provide for British uniforms, it clothed the allies as well and indeed the French soldiers too. Britain used its economic power to expand the Royal Navy, doubling the number of frigates and increasing the number of large ships of the line by 50%, while increasing the roster of sailors from 15,000 to 133,000 in eight years after the war began in 1793. France, meanwhile, saw its navy shrink by more than half.^[48]

The British budget in 1814 reached £66 million, including £10 million for the Navy, £40 million for the Army, £10 million for the Allies, and £38 million as interest on the national debt. The national debt soared to £679 million, more than double the GDP. It was willingly supported by hundreds of thousands of investors and tax payers, despite the higher taxes on land and a new income tax.^[49] The whole cost of the war came to £831 million. By contrast the French financial system was inadequate and Napoleon's forces had to rely in part on requisitions from conquered lands.^[50][51][52]

Free trade

Tariff Rates (France, UK, US)

After 1840, Britain abandoned mercantilism and committed its economy to free trade, with few barriers or tariffs.^[54] This was most evident in the repeal in 1846 of the Corn Laws, which had imposed stiff tariffs on imported grain. The end of these laws opened the British market to unfettered competition, grain prices fell, and food became more plentiful. By re-introducing income taxes in 1842 at the rate of 7 pence on the pound for incomes over ₤150, the government of Sir Robert Peel was able to compensate for loss of revenue and repeal import duties on over 700 items.^[55]

From 1815 to 1870, Britain reaped the benefits of being the world's first modern, industrialised nation. It described itself as 'the workshop of the world', meaning that its finished goods were produced so efficiently and cheaply that they could often undersell comparable, locally manufactured goods in almost any other market. If political conditions in a particular overseas market were stable enough, Britain could dominate its economy through free trade alone without having to resort to formal rule or mercantilism. Britain was even supplying half the needs in manufactured goods of such nations as Germany, France, Belgium, and the United States. By 1820, 30% of Britain's exports went to its Empire, rising slowly to 35% by 1910.^[56] Until the latter 19th century, India remained Britain's economic jewel in terms of both imports and exports. In 1867, when British exports to her Empire totaled ₤50 million, ₤21 million of that was earned from India's market alone.^[57] Second to India, but far behind, was Australia, whose imports from Britain totaled ₤8 million, followed by Canada (₤5.8 million), Hong Kong (₤2.5 million), Singapore (₤2 million), and New Zealand (₤1.6 million).^[57] While these figures were undoubtedly significant, they represented just over a third of total British exports, the same proportion as over forty years before.^[57]

Apart from coal and iron, most raw materials had to be imported so that, in the 1830s, the main imports were (in order): raw cotton (from the American South), sugar (from the West Indies), wool, silk, tea (from China), timber (from Canada), wine, flax, hides and tallow.^[58] By 1900, Britain's global share soared to 22.8% of total imports. By 1922, its global share soared to 14.9% of total exports and 28.8% of manufactured exports.^[59]

Railways

The British invented the modern railway system and exported it to the world. They emerged from Britain's elaborate system of canals and roadways, which both used horses to haul coal for the new steam engines installed in textile factories. Britain furthermore had the engineers and entrepreneurs needed to create and finance a railway system. In 1815, George Stephenson invented the modern steam locomotive, launching a technological race: bigger, more powerful locomotives using higher and higher steam pressures. Stephenson's key innovation came when he integrated all the components of a railways system in 1825 by opening the Stockton and Darlington line. It demonstrated it was commercially feasible to have a system of usable length. London poured money into railway building—a veritable bubble, but one with permanent value. Thomas Brassey brought British railway engineering to the world, with construction crews that in the 1840s employed 75,000 men across Europe. Every nation copied the British model. Brassey expanded throughout the British Empire and Latin America. His companies invented and improved thousands of mechanical devices, and developed the science of civil engineering to build roadways, tunnels and bridges. The telegraph, although invented and developed separately, proved essential for the internal communications of the railways because it allowed slower trains to pull over as express trains raced through. Telegraphs made it possible to use a single track for two-way traffic, and to locate where repairs were needed. Britain had a superior financial system based in London that funded both the railways in Britain and also in many other parts of the world, including the United States, up until 1914. The boom years were 1836 and 1845–47, when Parliament authorized 8,000 miles of railways with a projected future total of £200 million; that about equalled one year of Britain's GDP. Once a charter was obtained, there was little government regulation, as laissez faire and private ownership had become accepted practices.

George Hudson

Isambard Kingdom Brunel (1806–1859) designed the first major railway, the Great Western, built originally in the 1830s to cover the 100 miles from London to Bristol. Even more important was the highly controversial George Hudson. He became Britain's "railway king" by merging numerous short lines.^[68] Since there was no government agency supervising the railways, Hudson set up a system that all the lines adopted called the Railway Clearing House. It made interconnections easy for people and freight by standardizing routines for transferring freight and people between companies, and loaning out freight cars. By 1849 Hudson controlled nearly 30% of Britain's trackage. Hudson did away with accountants and manipulated funds—paying large dividends out of capital because profits were quite low, but no one knew that until his system collapsed and the railway bubble of the late 1840s burst.^[69]

Euston station in London, 1837. Note the open passenger carriages

By 1850 Britain had a well integrated, well engineered system that provided fast, on-time, inexpensive movement of freight and people to every city and most rural districts. Freight rates had plunged to a penny a ton mile for coal. The system directly or indirectly employed tens of thousands of engineers, conductors, mechanics, repairmen, accountants, station agents and managers, bringing a new level of business sophistication that could be applied to many other industries, and helping many small and large businesses to expand their role in the industrial revolution. Thus railways had a tremendous impact on industrialization. By lowering transportation costs, they reduced costs for all industries moving supplies and finished goods, and they increased demand for the production of all the inputs needed for the railway system itself. The system kept growing; by 1880, there were 13,500 locomotives which each carried 97,800 passengers a year, or 31,500 tons of freight.^[70]

Second Industrial Revolution

During the First Industrial Revolution, the industrialist replaced the merchant as the dominant figure in the capitalist system. In the later decades of the 19th century, when the ultimate control and direction of large industry came into the hands of financiers, industrial capitalism gave way to financial capitalism and the corporation. The establishment of behemoth industrial empires, whose assets were controlled and managed by men divorced from production, was a dominant feature of this third phase. By the middle of the 19th century, as the world's only fully-industrialized nation, British output represented just under half the total of the world's industrial capacity.^[57]

New products and services were also introduced which greatly increased international trade. Improvements in steam engine design and the wide availability of cheap iron (and after 1870 steel) meant that slow, sailing ships could be replaced with steamships, such as Brunel's SS Great Western. Electricity and chemical industries became important although Britain lagged behind the U.S. and Germany.

Amalgamation of industrial cartels into larger corporations, mergers and alliances of separate firms, and technological advancement (particularly the increased use of electric power and internal combustion engines fuelled by gasoline) were mixed blessings for British business during the late Victorian era. The ensuing development of more intricate and efficient machines along with mass production techniques greatly expanded output and lowered production costs. As a result, production often exceeded domestic demand. Among the new conditions, more markedly evident in Britain, the forerunner of Europe's industrial states, were the long-term effects of the severe Long Depression of 1873-1896, which had followed fifteen years of great economic instability. Businesses in practically every industry suffered from lengthy periods of low — and falling — profit rates and price deflation after 1873.

By the 1870s, financial houses in London had achieved an unprecedented level of control over industry. This contributed to increasing concerns among policy-makers over the protection of British investments overseas — particularly those in the securities of foreign governments and in foreign-government-backed development activities, such as railways. Although it had been official British policy to support such investments, with the large expansion of these investments in the 1860s, and the economic and political instability of many areas of investment (such as Egypt), calls upon the government for methodical protection became increasingly pronounced in the years leading up to the Crystal Palace Speech. At the end of the Victorian era, the service sector (banking, insurance and shipping, for example) began to gain prominence at the expense of manufacturing. During the late 18th century the United Kingdom experienced stronger increases in the service sector than in the industrial sector; industry grew by only 2 percent, whereas the service sector employment increased by 9 percent.^[71]

Foreign trade

Canning Dock, Liverpool c. 1910, the "Second City" of the British Empire.

Foreign trade tripled in volume between 1870 and 1914; most of the activity occurred with other industrialised countries. Britain ranked as the world's largest trading nation in 1860, but by 1913 it had lost ground to both the United States and Germany: British and German exports in that year each totalled $2.3 billion, and those of the United States exceeded $2.4 billion. Even so, Britain remained the world's largest trading nation. In addition to her own manufactures, Britain was the world's greatest emporium for the goods and produce of other nations. She was a top importer of foodstuffs, raw materials, and finished goods, much of which were re-exported to Europe or the United States.^[72] Her extensive trading contacts, investments in agriculture, and merchant shipping fleet enabled her to trade in a great volume of commodities remotely - transactions were concluded with foreign clients in London or other British cities over distant commodities like coffee, tea, cotton, rubber, and sugar.

Proportionally, even though trade volumes trebled between 1870 and 1914, the British share of the world market was actually shrinking. In 1880, 23 percent of world trade was British-owned - by 1910 it was 17 percent.^[73] As foreign trade increased, so in proportion did the amount of it going outside the Continent. In 1840, £7.7 million of its export and £9.2 million of its import trade was done outside Europe; in 1880 the figures were £38.4 million and £73 million. Europe's economic contacts with the wider world were multiplying, much as Britain's had been doing for years. In many cases, colonial control followed private investment, particularly in raw materials and agriculture.^[74] Intercontinental trade between North and South constituted a higher proportion of global trade in this era than in the late 20th century period of globalisation.^[75]

Export of capital

The Royal Exchange and Bank of England ca. 1910, at the heart of the City of London.

The City of London strengthened its position as the world's financial capital, the export of capital was a major base of the British economy 1880 to 1913, the "golden era" of international finance.^[76][77][78] By 1913 about 50% of capital investment throughout the world had been raised in London, making Britain the largest exporter of capital by a wide margin.^[79] As the British trade deficit widened (₤27 million in 1851, by 1911 it was ₤134 million), earnings from investment and financial services closed the gap and actually created an economic surplus.^[80] Part of the reason for the boom in financial services was because manufacturing became less profitable beginning in the 1880s, due to the largely depressed world market of these years, combined with the advent of manufactures from the United States and Germany.^[73] With competition fiercer than in mid-century, British industrialists and financiers invested excess capital into financial markets and overseas investments. In 1911, income from overseas investments amounted to ₤188 million; income from services like insurance, shipping, and banking totalled some ₤152 million.^[80] An indication of how dramatic the shift to financial services was, is that in the years between 1900 and 1913, total British investment abroad doubled, from ₤2 billion to ₤4 billion.^[79]

Investment was especially heavy in the independent nations of Latin America, which were eager for infrastructure improvements such as railways built by the British, ports, and telegraph and telephone systems. British merchants dominated trade in the region.^[81] Not all the investments paid off; the mines in the Sudan, for example, lost money.^[82] By 1913 Britain's overseas assets totalled about four billion pounds.^[83]

Business practices

Britain persisted in its free trade policy even as its major rivals, the U.S. and Germany, turned to high tariffs (as did Canada). American heavy industry grew faster than Britain, and by the 1890s was crowding British machinery and other products out of the world market.^[84]

New business practices in the areas of management and accounting made possible the more efficient operation of large companies. For example, in steel, coal, and iron companies 19th-century accountants used sophisticated, fully integrated accounting systems to calculate output, yields, and costs to satisfy management information requirements.^[85] South Durham Steel and Iron, was a large horizontally integrated company that operated mines, mills, and shipyards. Its management used traditional accounting methods with the goal of minimizing production costs, and thus raising its profitability. By contrast one of its competitors, Cargo Fleet Iron introduced mass production milling techniques through the construction of modern plants. Cargo Fleet set high production goals and developed an innovative but complicated accounting system to measure and report all costs throughout the production process. However, problems in obtaining coal supplies and the failure to meet the firm's production goals forced Cargo Fleet to drop its aggressive system and return to the sort of approach South Durham Steel was using.^[86]

The American "invasion" of the British home market demanded a response.^[87] Tariffs, although increasingly under consideration, were not imposed until the 1930s. Therefore, British businessmen were obliged to lose their market or else rethink and modernize their operations. The boot and shoe industry faced increasing imports of American footwear; Americans took over the market for shoe machinery. British companies realized they had to meet the competition so they re-examine their traditional methods of work, labour utilization, and industrial relations, and to rethink how to market footwear in terms of the demand for fashion.^[88]

Imperialism

After the loss of the American colonies in 1776, Britain built a "Second British Empire", based in colonies in India, Asia, Australia, Canada. The crown jewel was India, where in the 1750s a private British company, with its own army, the East India Company (or "John Company"), took control of parts of India. The 19th century saw Company rule extended across India after expelling the Dutch, French and Portuguese. By the 1830s the Company was a government and had given up most of its business in India, but it was still privately owned. Following the Indian Rebellion of 1857 the government closed down the Company and took control of British India and the Company's Presidency Armies.^[89]

Free trade (with no tariffs and few trade barriers) was introduced in the 1840s. Protected by the overwhelming power of the Royal Navy, the economic empire included very close economic ties with independent nations in Latin America. The informal economic empire has been called "The Imperialism of Free Trade."^[90]

Singapore docks in the 1890s.

Numerous independent entrepreneurs expanded the Empire, such as Stamford Raffles of the East India Company who founded the port of Singapore in 1819. Businessmen eager to sell Indian opium in the vast China market led to the Opium War (1839–1842) and the establishment of British colonies at Hong Kong. One adventurer, James Brooke, set himself up as the Rajah of the Kingdom of Sarawak in North Borneo in 1842; his realm joined the Empire in 1888. Cecil Rhodes set up an economic empire of diamonds in South Africa that proved highly profitable. There were great riches in gold as well but this venture led to expensive wars with the Dutch settlers known as Boers.

The possessions of the East India Company in India, under the direct rule of the Crown from 1857 —known as British India— was the centrepiece of the Empire, and because of an efficient taxation system it paid its own administrative expenses as well as the cost of the large British Indian Army. In terms of trade, however, India turned only a small profit for British business.^[91]

There was pride and glory in the Empire, as the talented young Britons vied for positions in the Indian Civil Service and for similar overseas career opportunities.^[92] The opening of the Suez Canal in 1869 was a vital economic and military link. To protect the canal, Britain expanded further, taking control of Egypt, the Sudan, Uganda, Kenya, Cyprus, Palestine, Aden, and British Somaliland. None were especially profitable until the discovery of oil in the Middle East after 1920. Some military action was involved, and from time to time there was a risk of conflict with other imperial powers seeking the same territory, as in the Fashoda Incident of 1898. All the incidents were resolved peacefully.

Cain and Hopkins argue that the phases of expansion abroad were closely linked with the development of the domestic economy. Therefore, the shifting balance of social and political forces under imperialism and the varying intensity of Britain's economic and political rivalry with other powers need to be understood with reference to domestic policies. Gentlemen capitalists, representing Britain's landed gentry and London's service sectors and financial institutions, largely shaped and controlled Britain's imperial enterprises in the 19th and early 20th centuries. Industrial leaders played a lesser role and found themselves dependent on the gentlemen capitalists.^[93][94]

1900–1914

The Edwardian era (1901-1910) stands out as a time of peace and plenty. There were no severe depressions and prosperity was widespread. Britain's growth rate, manufacturing output, and GDP (but not per capita) fell behind its rivals the United States, and Germany. Nevertheless, the nation still led the world in trade, finance and shipping, and had strong bases in manufacturing and mining.^[95] The industrial sector was slow to adjust to global changes, and there was a striking preference for leisure over entrepreneurship among the elite. In 1910, the British share of world industrial capacity stood at 15%, just behind Germany's 16%, and less than half of the United States' 35%.^[73]

Despite signs of relative weakness in certain sectors of the UK economy, the major achievements of the Edwardian years should be underlined. The City was the financial centre of the world—far more efficient and wide-ranging than New York, Paris or Berlin. British investment abroad doubled in the Edwardian years, from ₤2 billion in 1900 to ₤4 billion in 1913.^[79] Britain had built up a vast reserve of overseas credits in its formal Empire, as well as in its informal empire in Latin America and other nations. It had huge financial holdings in the United States, especially in railways. These assets proved vital in paying for supplies in the first years of the World War. The amenities, especially in urban life, were accumulating – prosperity was highly visible. The working classes were beginning to protest politically for a greater voice in government, but the level of industrial unrest on economic issues was not high until about 1908.^[96]

Labor Movement

The rise of a powerful, concerted, and politically effective labor movement was one of the major socio-economic phenomena of the Edwardian years in the UK. Trade union membership more than doubled during this time, from 2 million people in 1901 to 4.1 million in 1913.^[97] The Labour Party for the first time gained an active foothold in Parliament with the election of 30 Labour MPs in the 1906 General Election, enabling greater advocacy for the interests of the working classes as a whole.

Striking dock workers in Liverpool, gathered for a protest during the summer of 1911.

Inflation and stagnating wages began in 1908, which precipitated greater discontent among the working classes, particularly as the prosperity enjoyed by the middle and upper classes was becoming ever more visible.^[98] In that year, strikes increased precipitously, mainly in the cotton and shipbuilding industries where job-cuts had occurred. In 1910, with unemployment reaching a record-low of 3 percent, unions were emboldened by their bargaining power to make demands for higher wages and job stability. Strikes erupted throughout the nation - in the coal mining country of Wales and northeast England, the latter also witnessing a sustained railway workers' strike. In 1911 the National Transport Workers' Federation organized the first nationwide railway workers' strike, along with a general dockworker's strike in ports throughout the country.^[97] In Liverpool, the summertime strikes of the dock and transport workers culminated in a series of conflicts with the authorities between the 13th and 15th of August, leading to the death of two men and over 350 injured.^[98][99]

The major demands of the labor movement during these years were wage-rises, a national minimum wage, and greater stability in employment.^[98] In 1912 the National coal strike and another wave of transportation strikes cost the British economy an estimated 40 million working days.^[98] The coal strike was so disruptive that the British government conceded the main demand of the Miners Federation of Great Britain by passing the Coal Mines Act, which established a minimum wage for coal mining workers for the first time.^[98][100]

Tariff Reform

A Tariff Reform poster from 1910, encouraging Protectionism over the Free Trade of the Victorian Era

In Edwardian Britain, proposals for tariff reform which had begun in the 1890s became a mass political movement with high visibility.^[101] The Tariff Reform League, founded in 1903 and headed by Britain's most outspoken champion of protectionism, Joseph Chamberlain, pushed for the implementation of tariffs to protect British goods in domestic and Imperial markets.^[102] Tariff reformers like Chamberlain were worried by what was seen as a deluge of American and German products entering the domestic market; they argued that part of the reason for the success of the U.S. and German economies were the national tariffs each imposed to protect fledgling industries from foreign competition.^[101] Without tariffs, it was claimed, vulnerable young industries like electrical goods, automobiles, and chemicals would never gain traction in Britain.

A major goal of the Tariff Reform League was the foundation of an Imperial Customs Union, which would create a closed trade bloc in the British Empire and, it was hoped, fully integrate the economies of Britain and her overseas possessions.^[103] Under such an arrangement, Britain would maintain a reciprocal relationship whereby she would purchase raw materials from her colonies, the profits of which would allow them to buy finished goods from Britain, enriching both sides.^[102] Although it was a highly publicized and well-funded campaign, Tariff Reform never gained traction with the public at large. The defeat of Chamberlain's Liberal Unionist Party in the 1906 General Election, which returned a huge majority for free-trade stalwarts in the Liberal and Labour parties, was a resounding blow to the movement's electoral hopes, although the campaign itself persisted through the rest of the Edwardian period.^[101]

First World War

English factory workers producing shells for the war effort during the First World War.

The First World War saw a decline of economic production, with a major reallocation to munitions. It forced Britain to use up its financial reserves and borrow large sums from the U.S.^[104] Because of its prime importance in international finance, the entry of the UK into the war in August 1914 threatened a possible worldwide liquidity crisis. In Britain itself, there were fears of a run on the banks, which prompted the Treasury to take inflationary measures and begin printing 5 million new banknotes a day.^[105] To assuage nervous markets, a one-month moratorium on payments was declared, while the Bank of England agreed to guarantee the City of London's bills of exchange and to act as underwriter for London's Clearing houses.^[105]

Shipments of American raw materials and food allowed Britain to feed itself and its army while maintaining her productivity. The financing was generally successful,^[106] as the City's strong financial position minimized the damaging effects of inflation, as opposed to much worse conditions in Germany.^[107] Overall consumer consumption declined 18% from 1914 to 1919.^[108] To raise vital funds for the war effort, taxation also increased dramatically. Whereas before the war the majority of tax revenue was derived from indirect taxation, by 1920 60% of tax revenue was from income and "super tax" levies, like the one imposed on incomes over ₤10,000.^[109] Income tax had stood at just 6% before the war and only applied to 1.13 million Britons, by 1920 there were 3 million income tax payers at a rate of 30%.^[110]

Trade unions were encouraged as membership grew from 4.1 million in 1914 to 6.5 million in 1918, peaking at 8.3 million in 1920 before relapsing to 5.4 million in 1923.^[111] In Scotland, the shipbuilding industry expanded by a third.^[112] Women were available and many entered munitions factories and took other home front jobs vacated by men.^[113]

Postwar stagnation

The human and material losses of the World War in Britain were enormous. They included 745,000 servicemen killed and 24,000 civilians, with 1.7 million wounded. The total of lost shipping came to 7.9 million tons (much of it replaced by new construction), and £7,500 million in financial costs to the Empire. Germany owed billions in reparations, but Britain in turn owed the U.S. billions in loan repayments.^[114]

In 1919-20 there was a short-lived boom in the British economy, caused by a rush of investment pent-up during the war years and another rush of orders for new shipping to replace the millions of tons lost.^[115] However, with the end of war orders, a serious depression hit the economy by 1921-22. Exports fell to half of their 1913 levels, and unemployment peaked at 17%.^[115] Factors explaining the economic depression are on one hand the return to prewar gold standard at parity or upcoming structural problems to the northern industrial core of the UK.^[116] Another factor contributing to the relative decline of British industry during the 1920s was the loss of Britain's export markets, mostly in the Far East and Latin America. The diversion of shipping and production towards the war effort between 1914-18 meant that regional producers like the United States in Latin America or Japan in the Far East usurped important markets for British goods.^[115] Britain never regained its pre-1914 export volumes, by 1929 exports were still only 80% of what they had been in 1913.^[117]

Indeed, even if Britain was far better off compared to the badly battered Continent, economic stagnation lasted the whole decade.^[118] Overall growth averaged 1.8% per annum during the 1920s, slightly weaker but comparable to the United States.^[115] Slow growth was due in part to Britain's heavy dependence on exports, and world trade grew sluggishly through the 1920s.^[115] It was also overly dependent on so-called "staple" industries, those which had brought huge prosperity in the 19th century but by the 1920s were experiencing faltering demand and strong competition from abroad. In 1922, for example, the volume of cotton exports was only about half of what it had been in 1913, while coal exports were only one third of their 1913 levels.^[115] The most skilled craftsmen were especially hard hit, because there were few alternative uses for their specialised skills.^[119] In depressed areas the main social indicators such as poor health, bad housing, and long-term mass unemployment, pointed to terminal social and economic stagnation at best, or even a downward spiral. The heavy dependence on obsolescent heavy industry and mining was a central problem, and no one offered workable solutions. The despair reflected what Finlay (1994) describes as a widespread sense of hopelessness that prepared local business and political leaders to accept a new orthodoxy of centralised government economic planning when it arrived during the Second World War.^[120]

Productivity & Employment

In 1919, Britain reduced the working hours in major industries to a 48-hour week for industrial workers. Historians have debated whether this move depressed labour productivity and contributed to the slump. Scott and Spadavecchia argue that productivity was in some ways enhanced, especially through higher hourly productivity, and that Britain did not suffer in its exports because most other nations also reduced working hours. Looking at coal, cotton, and iron and steel, they find that Britain did not suffer any significant relative productivity loss in these industries.^[121] By 1924 workers had regained their productive output of 1913, this while working greatly reduced hours compared to the pre-war years.^[122] By 1938 British industrial productivity had increased by 75% compared to pre-1914 levels, even after the setbacks of reduced working hours and the effects of the Great Depression were taken into account.^[122]

By 1921, more than 3 million Britons were unemployed as a result of the postwar economic downturn. While the economy was recovering by 1922-3, the UK found itself struggling again by 1926, the general strike of that year doing it no favours. Growth for the remainder of the decade became erratic, with brief periods of stagnation constantly interrupting growth. Industrial relations briefly improved, but then came the Wall Street stock market crash in October 1929, which sparked the worldwide Great Depression (See the Great Depression in the United Kingdom).^[123] Unemployment had stood at less than 1.8 million at the end of 1930, but by the end of 1931 it had risen sharply to more than 2.6 million.^[124] By January 1933, more than 3 million Britons were unemployed, accounting for more than 20% of the workforce - with unemployment topping 50% in some parts of the country, particularly in South Wales and the north-east of England. The rest of the 1930s saw a moderate economic recovery stimulated by private housing. The rate of unemployment fell to 10% in 1938 - half of the level five years previously.^[125]

Steel

From 1800 to 1870, Britain produced more than half of the world's pig iron, and was in the lead in devising ways to make steel. In 1880, Britain produced 1.3 million tons of steel, and in 1893 3 million tons; by 1914 output was 8 million tons. Germany caught up in 1893 and produced 14 million tons in 1914.^[126] After 1900, the U.S. dominated global steel production, while the British industry languished.^[127]

Britain's steel industry brought in academic experts, such as Professor Oliver Arnold to analyse and make recommendations for improvements in productivity. The industry made significant technical advances in terms of vanadium, phospho-magnetic steels and other specialized high-strength alloys, using the electric furnace and other innovations, the devising of new techniques over the smoke issue. The industry trained a cadre of experts that made large firms scientifically self-sustaining.^[128]

Coal

Politics became a central issue for the coal miners, whose organization was facilitated by their location in remote one-industry villages. The Miners' Federation of Great Britain formed in 1888, and counted 600,000 members in 1908. Much of the 'old left' of Labour politics can trace its origins to coal-mining areas.^[129]

New Industries

While Britain remained overly dependent on 'staple' heavy industries, the First World War had the advantage of stimulating production in new industries where the UK had lagged behind before 1914. The interwar years saw new technologies develop at a breakneck pace, creating lucrative new industries including automobile, airplane, and motorbike manufacture. Before the First World War, automobile manufacture in Britain had been a boutique industry limited to producing expensive luxury cars. The industry produced 34,000 vehicles for the year 1913; by 1937 over half a million were being produced.^[135] Most of these were affordable models like the Austin 7 (introduced 1921), the Morris Minor (1928), as well as Model A and Model Y cars produced by Ford of Britain. The adoption of streamlined automation processes and the strong competition between manufacturers was responsible for a 50% drop in motorcar prices between the mid 20s and mid 30s, making cars more affordable (over 1 million were owned by 1930).^[136][137]

The chemicals industry, once dominated by Germany and the United States, also thrived in the UK during the interwar years. By 1939 it employed 100,000 people and produced fertilizers, pharmaceuticals, and synthetic materials.^[138] Electrical engineering also mushroomed: the establishment of the Central Electricity Board in 1926 enabled a nationwide high-voltage electrical grid to be developed. By 1939 two thirds of homes had electricity supply, which in turn opened up a new consumer market for electrically powered appliances like vacuum cleaners, refrigerators, radios and stoves.^[139]

Between 1923 and 1938, the most successful new industries were: automobile production, electrical engineering, mechanical engineering, metal goods, and printing. These created a net total of 557,920 new jobs between 1923 and 1938, some 96% of all new industrial jobs created in the interwar period.^[140] These industries were overwhelmingly concentrated in the communities surrounding London and cities in the West Midlands, particularly Coventry and Birmingham, where there was an established workforce skilled in the production of high quality metal goods.^[140]

1920s "consumer boom"

In spite of the serious problems that plagued heavy industry, the 1920s marked an era of unprecedented growth for the British consumer industry, until then a minor player in the national economy. While not creating a fully-fledged "consumer culture" as in the United States during the same decade, it had an important effect over British society, primarily on the middle classes which gained access to commodities previously reserved for the upper crust, primarily automobiles, ownership rising tenfold during the interwar period (from around 500,000 in 1919 to approximately over 3 million in 1929 and 5 million in 1939). Sales of electric appliances boomed thanks to the rise of consumer-oriented credit and loans. Higher wages and shorter working hours also led to the rise of recreation: Gramophone records, radio (or "the wireless" as it was referred), magazines and cinema became part of everyday life much like sports, primarily football and cricket.

Tourism grew rapidly in the interwar years because of the rapidly rising number of motorized middle-class and lower-middle-class holidaymakers, as well as an influx of American tourists. Seaside resorts like Blackpool, Brighton and Skegness were particularly popular. However, those tourist sites that catered to the very wealthy (which now began holidaying abroad) or were located in depressed areas, all experienced a decline in profits, especially during the Great Depression.^[141]

Electricity, gas, plumbing and telephone services became common as well during the decade, even in some working class households. However, those living in the most remote and poorest parts of Britain saw little change in their living standards, with many Britons still living in terraced homes with outdoor toilets as late as the 1960s.

1929–1939: the Great Depression

Unemployed people in front of a workhouse in London, 1930

In 1929, the Wall St Crash affected Britain in 1930, resulting in it leaving the Gold Standard. Whereas Britain had championed the concept of the free market when it was ascendant in the world economy, it gradually withdrew to adopting Tariff Reform as a measure of protectionism. By the early 1930s, the depression again signalled the economic problems the British economy faced. Unemployment soared during this period; from just over 10% in 1929 to more than 20% (or more than 3 million of the workforce) by early 1933. However, it had fallen to 13.9% by the start of 1936. While heavy industry sank to new lows, the consumer industry recovered by 1934 to the point production increased 32% between 1933 and 1937. A good indication of the strong consumer market was the growth of retailers during the 30s. Marks & Spencer, for example, increased its turnover from a modest ₤2.5 million in 1929 to over ₤25 million in 1939, necessitating the opening of dozens of new locations in the burgeoning suburbs to meet demand.^[115]

In political terms, the economic problems found expression in the rise of radical movements who promised solutions which conventional political parties were no longer able to provide. In Britain this was seen with the rise of the Communist Party of Great Britain (CPGB) and the Fascists under Oswald Mosley. However, their political strength was limited and unlike in the rest of Europe, the conventional political parties in the UK never saw real danger. A National Government was formed in 1931, with the Conservatives returning to power in 1935 after six years of the first Labour-led government under Ramsay MacDonald.

Second World War

In the Second World War, 1939–45, Britain had a highly successful record of mobilizing the home front for the war effort, in terms of mobilizing the greatest proportion of potential workers, maximizing output, assigning the right skills to the right task, and maintaining the morale and spirit of the people.^[142] Much of this success was due to the systematic planned mobilization of women, as workers, soldiers, and housewives, enforced after December 1941 by conscription.^[143] The women supported the war effort, and made the rationing of consumer goods a success.

Smoke billowing from London's Surrey Docks, after a destructive night-time bombing raid by the Luftwaffe on 7th September 1940.

Industrial production was reoriented toward munitions, and output soared. In steel, for example, the Materials Committee of the government tried to balance the needs of civilian departments and the War Department, but strategic considerations received precedence over any other need.^[144] Highest priority went to aircraft production as the RAF was under continuous heavy German pressure. The government decided to concentrate on only five types of aircraft in order to optimize output. They received extraordinary priority. Covering the supply of materials and equipment and even made it possible to divert from other types the necessary parts, equipment, materials and manufacturing resources. Labour was moved from other aircraft work to factories engaged on the specified types. Cost was not an object. The delivery of new fighters rose from 256 in April to 467 in September 1940—more than enough to cover the losses—and Fighter Command emerged triumphantly from the Battle of Britain in October with more aircraft than it had possessed at the beginning.^[145] Starting in 1941 the U.S. provided munitions through Lend lease that totalled $15.5 billion^[146]

After war broke out between Britain and Germany in September 1939, Britain imposed exchange controls. The British Government used its gold reserves and dollar reserves to pay for munitions, oil, raw materials and machinery, mostly from the U.S. By the third quarter of 1940 the volume of British exports was down 37% compared to 1935. Although the British Government had committed itself to nearly $10,000 million of orders from America, Britain's gold and dollar reserves were near exhaustion. The Roosevelt Administration was committed to large-scale economic support of Britain and in early 1941 enacted Lend-Lease, whereby America would give Britain supplies totalling $31.4 billion which never had to be repaid.^[147]

1945–1951: Age of Austerity

After World War II, the British economy had again lost huge amounts of absolute wealth. Its economy was driven entirely for the needs of war and took some time to be reorganised for peaceful production. Britain's economic position was relatively strong compared to its devastated European neighbors - in 1947 British exports were equivalent in value to the combined exports of France, Western Germany, Italy, Norway, Denmark, Belgium, the Netherlands, and Luxembourg.^[154] Anticipating the end of the conflict, the United States had negotiated throughout the war to liberalise post-war trade and the international flow of capital in order to break into markets which had previously been closed to it, including the British Empire's Pound Sterling bloc. This was to be realised through the Atlantic Charter of 1941, through the establishment of the Bretton Woods system in 1944, and through the new economic power that the US was able to exert due to the weakened British economy.

A snowbound bus in Huddersfield, during the record-cold winter of 1946-47, which caused major fuel shortages and damaged Britain's fragile post-war economic recovery

Immediately after the war in the Pacific had ended, the U.S. halted free Lend-Lease, but did give the UK a long-term low-interest loan of USD 4.33bn. The winter of 1946–1947 proved to be very harsh, with curtailed production and shortages of coal, which again affected the economy so that by August 1947, when convertibility was due to begin, the economy was not as strong as it needed to be. When the Labour Government enacted convertibility, there was a run on Sterling, meaning that Sterling was being traded in for dollars, seen as the new, more powerful and stable currency in the world. This damaged the British economy and within weeks it was stopped. By 1949, the British pound was over valued and had to be devalued.

The major economic priority of post-war Britain was to raise exports and balance the UK's dollar deficit. This required the extension of rationing, as British goods and produce were prioritized for export markets. Unlike Continental European countries, where rationing was abandoned within a few years of the wars' end, Britain actually tightened rationing restrictions and didn't fully abandon them until 1954.^[155] The U.S. began Marshall Plan grants (mostly grants with a few loans) that pumped $3.3 billion into the economy and forced businessmen to modernize their approach to management.^[156] Marshall Aid, however, failed to have the desired effect of modernizing industry and stimulating the economy, because 97% of the funds were used to service British debt repayments. This left the nation at a comparative disadvantage to rivals like France and West Germany, who were able to invest the money directly into industry and infrastructure, creating more competitive, efficient economies in the long-term.^[157]

Nationalisation

The Labour Governments of 1945–1951 enacted a political programme rooted in collectivism including the nationalisation of industries and state direction of the economy. Both wars had demonstrated the possible benefits of greater state involvement. This underlined the future direction of the post-war economy, and was supported in the main by the Conservatives. However, the initial hopes for nationalisation were not fulfilled and more nuanced understandings of economic management emerged, such as state direction, rather than state ownership. Throughout though, the basis remained the same: applying the economic theories of Keynes and continued state involvement.

With the postwar Labour Governments, the first comprehensive attempts at economic planning were made with initiatives intended to overhaul chronically depressed regions of the UK. The 1945 Distribution of Industry Act designated "development areas" in northeast England, Scotland, and Wales according to the findings of the Barlow Report of 1940, which had recommended a complete economic overhaul of the troubled areas it pinpointed.^[158] Between 1945 and 1950, the British government pumped some ₤300 million into the building of 481 new factories in these regions, to be leased to private industry. In addition there were 505 privately owned factories built in the troubled regions on the active encouragement of the government in London. This activity created an estimated 200,000 new jobs.^[159]

The concept of nationalizing the coal mines had been accepted in principle by owners and miners alike before the elections of 1945. The owners were paid £165,000,000. The government set up the National Coal Board to manage the coal mines; and it loaned it £150,000,000 to modernize the system. The general condition of the coal industry had been unsatisfactory for many years, with poor productivity. In 1945, there were 28% more workers in the coal mines than in 1890, but the annual output was only 8% greater. Young people avoided the pits; between 1931 and 1945 the percentage of miners more than 40 years old rose from 35% to 43%, and 24,000 over 65 years old. The number of surface workers decreased between 1938 and 1945 by only 3,200, but in that same time the number of underground workers declined by 69,600, substantially altering the balance of labour in the mines. That accidents, breakdowns, and repairs in the mines were nearly twice as costly in terms of production in 1945 as they had been in 1939 was probably a by-product of the war. Output in 1946 averaged 3,300,000 tons weekly. By summer 1946 it was clear that the country was facing a coal shortage for the upcoming winter with stock piles of 5 million tons too low. Nationalization exposed both a lack of preparation for public ownership and a failure to stabilize the industry in advance of the change. Also lacking were any significant incentives to maintain or increase coal production to meet demand.^[160]

Prosperity of the 1950s

The 1950s and 1960s were prosperous times and saw continued modernisation of the economy.^[161] Representative was the construction of the first motorways, for example. Britain maintained and increased its financial role in the world economy, and used the English language to promote its educational system to students from around the globe. Unemployment was relatively low during this period, and the standard of living continued to rise, with more new private and council housing developments and the number of slum properties diminishing. Churchill and the Conservatives were back in power following the 1951 elections, but they largely continued the welfare state policies as set out by the Labour Party in the late 1940s.

Butlins holiday camp in Pwllheli, Wales in the 1950s. Holiday camps symbolized the newfound prosperity and leisure of postwar Britain

During the "golden age" of the 1950s and 1960s, unemployment in Britain averaged only 2%. As prosperity returned, Britons became more family centred.^[162] Leisure activities became more accessible to more people after the war. Holiday camps, which had first opened in the 1930s, became popular holiday destinations in the 1950s – and people increasingly had the money to pursue their personal hobbies. The BBC's early television service was given a major boost in 1953 with the coronation of Elizabeth II, attracting a worldwide audience of twenty million, plus tens of millions more by radio, proving an impetus for middle-class people to buy televisions. In 1950, just 1% owned television sets; by 1965 25% did. As austerity receded after 1950 and consumer demand kept growing, the Labour Party hurt itself by shunning consumerism as the antithesis of the socialism it demanded.^[163]

Small neighbourhood shops were increasingly replaced by chain stores and shopping centres, with their wide variety of goods, smart advertising, and frequent sales. Cars were becoming a significant part of British life, with city-centre congestion and ribbon developments springing up along many of the major roads. These problems led to the idea of the green belt to protect the countryside, which was at risk from development of new housing units.^[164]

The post-war period witnessed a dramatic rise in the average standard of living, with a 40% rise in average real wages from 1950 to 1965.^[165] Workers in traditionally poorly paid semi-skilled and unskilled occupations saw a particularly marked improvement in their wages and living standards. In terms of consumption, there was more equality, especially as the landed gentry was hard pressed to pay its taxes and had to reduce its level of consumption. As a result of wage rises, consumer spending also increased by about 20% during the same period, while economic growth remained at about 3%. In addition, the last food rations were ended in 1954 while hire-purchase controls were relaxed in the same year. As a result of these changes, large numbers of the working classes were able to participate in the consumer market for the first time.^[166]

Entitlement to various fringe benefits was improved. In 1955, 96% of manual labourers were entitled to two weeks' holiday with pay, compared with 61% in 1951. By the end of the 1950s, Britain had become one of the world's most affluent countries, and by the early Sixties, most Britons enjoyed a level of prosperity that had previously been known only to a small minority of the population.^[167] For the young and unattached there was, for the first time in decades, spare cash for leisure, clothes, and luxuries. In 1959, Queen magazine declared that "Britain has launched into an age of unparalleled lavish living." Average wages were high while jobs were plentiful, and people saw their personal prosperity climb even higher. Prime Minister Harold Macmillan claimed that "the luxuries of the rich have become the necessities of the poor." As summed up by R. J. Unstead,

"Opportunities in life, if not equal, were distributed much more fairly than ever before and\ the weekly wage-earner, in particular, had gained standards of living that would have been almost unbelievable in the thirties."^[168]

As noted by historian Martin Pugh:

"Keynesian economic management enabled British workers to enjoy a golden age of full employment which, combined with a more relaxed attitude towards working mothers, led to the spread of the two-income family. Inflation was around 4 per cent, money wages rose from an average of £8 a week in 1951 to £15 a week by 1961, home-ownership spread from 35 per cent in 1939 to 47 per cent by 1966, and the relaxation of credit controls boosted the demand for consumer goods."^[169]

The number one selection for the housewife was a washing machine. Ownership jumped from 18 percent in 1955 to 29 percent in 1958, and 60 percent in 1966.^[170] By 1963, 82% of all private households had a television, 72% a vacuum cleaner, and 30% a refrigerator. John Burnett notes that ownership had spread down the social scale so that the gap between consumption by professional and manual workers had considerably narrowed. The provision of household amenities steadily improved in the late decades of the century. From 1971 to 1983, households having the sole use of a fixed bath or shower rose from 88% to 97%, and those with an internal WC from 87% to 97%. In addition, the number of households with central heating almost doubled during that same period, from 34% to 64%. By 1983, 94% of all households had a refrigerator, 81% a colour television, 80% a washing machine, 57% a deep freezer, and 28% a tumble-drier.^[171]

Relative Decline

From a European perspective, however, Britain was not keeping pace. Between 1950 and 1970, it was overtaken by most of the countries of the European Common Market in terms of the number of telephones, refrigerators, television sets, cars, and washing machines per 100 of the population.^[172] Education grew, but not as fast as in rival nations. By the early 1980s, some 80% to 90% of school leavers in France and West Germany received vocational training, compared with 40% in the United Kingdom. By the mid-1980s, over 80% of pupils in the United States and West Germany and over 90% in Japan stayed in education until the age of eighteen, compared with barely 33% of British pupils.^[173] In 1987, only 35% of 16- to 18-year-olds were in full-time education or training, compared with 80% in the United States, 77% in Japan, 69% in France, and 49% in the United Kingdom.^[174]

Industrial growth in Britain, while remaining steady through the 1950s, was not nearly as strong as on the continent. The statistics can be deceptive, because Britain was far ahead of other European nations in terms of industrial development and urbanization. Countries like Italy, France and Spain, overwhelmingly agrarian in character at the end of the Second World War, were experiencing a process of rapid industrialization and urbanization Britain had already passed through in the 19th century. This approach is known as the "early start theory" among economists, and explains why European nations showed markedly stronger levels of absolute growth in industry compared to the UK, a country which was already transitioning into a post-industrial, service-based economy.^[175][176] These countries had large surplus agricultural populations to draw into the cities to work in factories, while the UK as the most heavily urbanized nation in Europe had only a paltry 5% of the UK population employed on the land by 1945 (dropping to 2.7% by 1977). As such, the traditional source of new labor for low-wage factory work, rural farmers, was virtually non-existent in Britain and accordingly limited growth potential.^[177]

There was also a systemic malaise in British industry, which was famously inefficient and opposed to innovations. Tony Judt described the prevailing attitude of post-war industrialists: "British factory managers preferred to operate in a cycle of under-investment, limited research and development, low wages and a shrinking pool of clients, rather than risk a fresh start with new products in new markets."^[178] The overriding emphasis placed on exports by the British government, in its effort to repair the nation's dollar deficit, made things worse, because it encouraged manufacturers to place all investment in expanding output, at the expense of updating machinery, introducing new technologies, improving production methods, etc. This policy was sustainable in the short-term, because in the late 1940s and early 50s world trade boomed and Britain, with its large and relatively undamaged industrial base, was in a uniquely advantageous position to satisfy demand. In 1950, 25% percent of world exports were British-made, and the total volume of British manufactured goods was double that of France and Germany combined.^[179] However, by the late 1950s, the economies of West Germany, France, Japan, and Italy, had recovered from wartime infrastructure damage, replacing destroyed stock with state-of-the-art machinery and applying modern production methods in a process called "rejuvenation by defeat".^[175] Continental governments actively encouraged recovery through direct investment/subsidies in targeted industries, in the case of Italy and France, or more widely through encouraging easy access to credit through national banks, a marked characteristic in France and West Germany. British industrialists saw no such intervention from their own government, which more or less left the private sector to itself.^[180] British goods were also more expensive abroad because of Sterling's overvaluation, but inferior in quality compared to the products flooding the world market from the United States, Germany and Italy.

Rapid decolonization in the British Empire through the late 1950s and 1960s dealt a further blow to British industry. Britain had enjoyed a virtual monopoly of the consumer markets within the Empire, enforced by the closed Pound Sterling Bloc, but it could not compete once the territories gained independence and were free to negotiate their own trade agreements.

1960–1979: the Sixties and Seventies

1979–1990: the Thatcher era

The election of Margaret Thatcher in 1979 marked the end of the post-war consensus and a new approach to economic policy, including privatisation and deregulation, reform of industrial relations, and tax changes. Competition policy was emphasised instead of industrial policy; consequent deindustrialisation and structural unemployment was more or less accepted.^[3] Thatcher's battles with the unions culminated in the Miners' Strike of 1984.

The Government applied monetarist policies to reduce inflation, and reduced public spending. Deflationary measures were implemented against the backdrop of the recession of 1980/81. Inflation was at it's worst at over 20% in 1980, but by 1982-83 it had subsided to less than 10% and continued to subside until stabilizing at around 4% in the autumn of 1987.^[191] With the recession of 1980/81, unemployment passed 2 million in the autumn of 1980, 2.5 million the following spring. By January 1982, unemployment had reached 3 million for the first time since the early 1930s, though this time the figure accounted for a lesser percentage of the workforce than the early 1930s figures, now standing at around 12.5% rather than in excess of 20%. In areas hit particularly hard by the loss of industry, unemployment was much higher; coming close to 20% in Northern Ireland and exceeding 15% in many parts of Wales, Scotland and northern England.^[192] The peak of unemployment actually came some two years after the recession ended and growth had been re-established, when in April 1984 unemployment stood at just under 3.3 million.^[193]

The development of a new financial centre at Canary Wharf was initiated by the Thatcher government to revitalize London's disused docklands area

According to Eric Hobsbawm, Thatcher oversaw an "industrial holocaust", which saw Britain's industrial capacity decrease by fully one quarter during the years 1980–84.^[194] Major state-controlled firms were privatised, including British Aerospace (1981), British Telecom (1984), British Leyland (1984), Rolls-Royce (1987), and British Steel Corporation (1988). The electricity, gas and English water industries were split up and sold off.

Exchange controls, in operation since the war, were abolished in 1979. British net assets abroad rose approximately ninefold from £12 billion at the end of 1979 to nearly £110 billion at the end of 1986, a record post-war level and second only to Japan.^[195] Privatisation of nationalised industries increased share ownership in Britain: the proportion of the adult population owning shares went up from 7% in 1979 to 25% in 1989.^[196] The Single European Act (SEA), signed by Margaret Thatcher, allowed for the free movement of goods within the European Union area. The ostensible benefit of this was to give the spur of competition to the British economy, and increase its ultimate efficiency.

The early 1980s recession saw unemployment rise above three million, but the subsequent recovery, which saw annual growth of over 4 percent in the late 1980s, led to contemporary claims of a British 'economic miracle'.^[197] There is significant controversy as to whether Thatcherism was the reason for the boom in Britain in the 1980s; North Sea oil has been identified as the major factor in the increases in economic growth in the mid and late 1980s. However, many of the economic policies put in place by the Thatcher governments have been kept since, and even the Labour Party which had once been so opposed to the policies had by the late 1990s, on its return to government after nearly 20 years in opposition, dropped all opposition to them.

Indeed, the Labour Party of the 1980s had taken a shift to the left after the election of Michael Foot as leader in 1980, leading to a split in the party to form the centrist Social Democratic Party, which formed an alliance with the Liberals and contested two general elections, with disappointing results, before merging in 1988 to form the Liberal Democrats. The Conservatives were re-elected in 1983 and again in 1987, with a majority of more than 100 seats both times.

By the end of 1986, Britain was in the first stages of an economic boom, which saw unemployment fall below 3 million and reach a 10-year low of 1.6 million by December 1989. However, the rate of economic growth slowed down in 1989, with inflation approaching 10% and fears of an imminent recession being rife in the national media. Interest rates were increased by the government in an attempt to control inflation.^[198]

1990–1997: the Major years

In November 1990, Margaret Thatcher stood down from the office of Prime Minister after losing first the confidence and then the support in Parliament of the Conservative Party's MPs, which she needed in order to continue. John Major was elected her successor. The government's popularity was also falling following the introduction of poll tax earlier that year, while unemployment was also starting to increase again as another recession loomed. Opinion polls were suggesting that the next general election could be won by Labour, led by Neil Kinnock since the resignation of Michael Foot in 1983.

Despite several major economies showing quarterly detraction during 1989, the British economy continued to grow well into 1990, with the first quarterly detraction taking place in the third quarter of the year, by which time unemployment was starting to creep upwards again after four years of falling. The beginning of another recession was confirmed in January 1991. Interest rates had been increased between 1988 and 1990 to control inflation, which topped 10% in 1990 but was below 3% by the end of 1992.

Economic growth was not re-established until early 1993, but the Conservative government which had been in power continuously since 1979 managed to achieve re-election in April 1992, fending off a strong challenge from Neil Kinnock and Labour, although with a significantly reduced majority.^[199]

The early 1990s recession was officially the longest in Britain since the Great Depression some 60 years earlier, though the fall in output was not as sharp as that of the downturn of the Great Depression or even that of the early 1980s recession. It had started during 1990 and the end of the recession was not officially declared until April 1993, by which time nearly 3 million people were unemployed.^[200]

The British pound was tied to EU exchange rates, using the Deutsche Mark as a basis, as part of the Exchange Rate Mechanism (ERM); however, this resulted in disaster for Britain. The restrictions imposed by the ERM put pressure on the pound, leading to a run on the currency. Black Wednesday in September 1992 ended British membership of the ERM. It also damaged the credibility of the Conservative's reputation for economic competence, and contributed to the end of the 18 years of consecutive Conservative government in 1997. The party had long been divided over European issues and many of these rifts within the party had still not been mended by 1997.

Despite the downfall of the Conservative government, it had seen a strong economic recovery in which unemployment had fallen by more than 1 million since the end of 1992 to 1.7 million by the time of their election defeat just over four years later. Inflation also remained low, with the ERM exit in 1992 being followed by a gradual decrease in interest rates during the years that followed.^[201]

1997 to 2001: New Labour

From May 1997, Tony Blair's newly elected Labour government stuck with the Conservatives' spending plans. The Chancellor, Gordon Brown, gained a reputation by some as the "prudent Chancellor" and helped to inspire renewed confidence in Labour's ability to manage the economy following the economic failures of earlier Labour governments. One of the first acts that the new Labour government embarked on was to give the power to set interest rates to the Bank of England, effectively ending the use of interest rates as a political tool. Control of the banks was given to the Financial Services Agency. Labour also introduced the minimum wage to the United Kingdom, which has been raised every year since its introduction in April 1999. The Blair government also introduced a number of strategies to cut unemployment, including an expansion of the public sector. Unemployment was constantly below 1.5 million during the first half of the 2000s - a level not seen since the late 1970s, although the government never succeeded in getting unemployment back into the six figure tallies which were seen for most of the 30 years after the end of World War II.

The 2008 recession and quantitative easing

The UK entered a recession in Q2 of 2008, according to the UK Office for National Statistics (ONS) and exited it in Q4 of 2009. The revised ONS figures of November 2009 showed that the UK had suffered six consecutive quarters of contraction.^[202][203] On 23 January 2009, Government figures from the Office for National Statistics showed that the UK was officially in recession for the first time since 1991.^[204] It entered a recession in the final quarter of 2008, accompanied by rising unemployment which increased from 5.2% in May 2008 to 7.6% in May 2009. The unemployment rate among 18- to 24-year-olds has risen from 11.9% to 17.3%.^[205] Although initially Britain lagged behind other major economies including Germany, France, Japan, and the US which all returned to growth in the second quarter of 2009, the country eventually returned to growth in the last quarter of 2009. On 26 January 2010, it was confirmed that the UK had left its recession, the last major economy in the world to do so.^[206] In the 3 months to February 2010 the UK economy grew yet again by 0.4%.^[207] In Q2 of 2010 the economy grew by 1.2% the fastest rate of growth in 9 years. In Q3 of 2010 figures released showed the UK economy grew by 0.8%; this was the fastest Q3 growth in 10 years.

On 5 March 2009, the Bank of England announced that they would pump £200 billion of new capital into the British economy, through a process known as quantitative easing. This is the first time in the United Kingdom's history that this measure has been used, although the Bank's Governor Mervyn King suggested it was not an experiment.^[208] The process will see the BoE creating new money for itself, which it will then use to purchase assets such as government bonds, bank loans, or mortgages.^[209] Despite the misconception that quantitative easing involves printing money, the BoE are unlikely to do this and instead the money will be created electronically and thus not actually enter the cash circulation system.^[210] The initial amount to be created through this method will be £75 billion, although former Chancellor of the Exchequer Alistair Darling had given permission for up to £150 billion to be created if necessary.^[211] It is thought the process is likely to occur over a period of three months with results only likely in the long term.^[208]

The BoE has stated that the decision has been taken to prevent the rate of inflation falling below the two percent target rate.^[209] Mervyn King, the Governor of the BoE, also suggested there were no other monetary options left as interest rates had already been cut to their lowest level ever of 0.5% and it was unlikely they would be cut further.^[211]

As of the end of November 2009, the economy had shrunk by 4.9%, making the 2008–2009 recession the longest since records began.^[207] In December 2009, the Office for National Statistics revised figures for the third quarter of 2009 showed that the economy shrank by 0.2%, compared to a 0.6% fall the previous quarter.^[202]

It has been suggested that the UK initially lagged behind its European neighbours because the UK entered the 2008 recession later. However, German GDP fell 4.7% year on year compared to the UK's 5.1%, and Germany has now posted a second quarterly gain in GDP.^[212] Commentators suggest that the UK suffered a slightly longer recession than other large European countries as a result of government policy dating back to the policies of the Thatcher government of 1979, in which UK governments have moved away from supporting manufacturing and focused on the financial sector.^{[213][214][215]} The OECD predicts that the UK will grow 1.6% in 2010. The unemployment rate recorded by the Labour Force Survey fell in the fourth quarter of 2009,^[216] the first of the big 3 economies in the EU to do so. Gross Domestic Product (GDP) decreased by a (second revision) figure of 0.2% in the third quarter of 2009, after a decrease of 0.6% in the second quarter, according to the Office for National Statistics (ONS).^[202] There was a 2.4% decline in the first quarter of 2009. The economy has now contracted 5.9% from its peak before the recession began, the BBC reports.^[217]

In October 2007, the International Monetary Fund (IMF) had forecast British GDP to grow by 3.1% in 2007 and 2.3% in 2008.^[218] However, GDP growth slowed to a fall of 0.1% in the April–June (second) quarter of 2008 (revised down from zero).^[219] In September 2008, the OECD forecast contraction for at least two quarters for the UK economy, possibly severe, placing its predicted performance last in the G7 of leading economies.^[220] Six quarters later the UK economy was still contracting, placing a question mark over OECD forecasting methods.

It has been argued that heavy government borrowing over the past cycle has led to a severe structural deficit, reminiscent of previous crises, which will inevitably exacerbate the situation and place the UK economy in an unfavourable position compared to its OECD partners as attempts are made to stimulate recovery, other OECD nations having allowed greater room for manoeuvre thanks to contrasting policies of relatively tighter fiscal control prior to the global downturn.^[221]

In May 2009 the European Commission (EC) stated: "The UK economy is now clearly experiencing one of its worst recessions in recent history." The EC expected GDP to decline 3.8pc in 2009 and projected that growth will remain negative for the first three quarters of 2009. It predicted two quarters of "virtual stagnation" in late 2009 and early 2010, followed by a gradual return to "slight positive growth by late 2010".^[222]

The FTSE 100 and FTSE 250 rose to their highest levels in a year on 9 September 2009 with the FTSE 100 breaking through 5,000 and the FTSE 250 breaking through 9,000. On 8 September the National Institute of Economic and Social Research believed that the economy had grown by 0.2% in the three months to August, but was proved wrong. In its eyes the UK recession was officially over, although it did warn that "normal economic conditions" had not returned. On the same day, figures also showed UK manufacturing output rising at its fastest rate in 18 months in July.^[223] On 15 September 2009 the EU incorrectly predicted the UK is expected to grow by 0.2% between July and September, on the same day the governor of the Bank of England, Mervyn King said the UK GDP is now growing.^[224] Unemployment has recently fallen in Wales.^[225]

Many commentators in the UK were certain that the UK would leave recession officially in Q3, believing that all the signs showed that growth was extremely likely, although in fact government spending had been insufficient to rescue the economy from recession at that point. Figures in fact showed no growth in retail sales in September 2009, and a 2.5% decline in industrial output in August.^[217] The revised UK figures confirmed that the economy shrank in Q3 of 2009 by 0.2%, although government spending on cash for the car scrappage scheme helped. The car scrappage scheme enabled owners of cars at least 10 years old to buy a new car at a reduced price in return for having their old car scrapped, and proved very popular with motorists.

Yet this temporary lapse was followed by a solid 0.4% growth in the Q4.

UK manufacturers' body, the EEF, appealed for more cash from the government: "Without an extension of support for business investment in the pre-Budget statement next month, it will be difficult to see where the momentum for growth will come from."^[226]

The downturn in the economy during 2008 and 2009 saw the popularity of the Labour government slump, and opinion polls all showed the Conservatives in the lead during this time, although by early 2010 the gap between the parties was narrow enough to suggest that the imminent general election would result in a hung parliament - as happened in May 2010. The Conservatives had the largest number of seats in the election, 20 short of a majority, and formed a government in coalition with the Liberal Democrats. The new government was faced with having to make deep public spending cuts over the following years in order to tackle the high level of national debt which had mounted up during Labour's response to the recession, which meant that unemployment remained high and the economy struggled to re-establish growth, although a marked improvement finally occurred in 2013 when economic growth and falling unemployment were sustained.

Moody's maintained the UK's AAA credit rating in September 2010, forecasting stable finances largely driven by governmental action. It also reported that while the economy is flexible to grow in the future household debt repayments, a poor export market and the economy's large exposure to the finance sector were factors likely to sap growth.^[227]

Subsequent to that, the economy contracted in 5 of the next 7 quarters, thus ensuring zero net growth from the end of the recession at the end of 2009, through to the middle of 2012. In 2010, the economy picked up and growing steadily however in the summer the euro-zone crisis centred on Greece led to a second slow down in all European countries. The euro-zone entered a double dip recession that lasted from Q1 2011 until Q2 2013, and while the UK had no double dip recession it did however experience stagnant growth.^[228] While the first half of 2012 saw inflationary pressures subside and business confidence increase, a number of fundamental weaknesses remain, most notably a decline in the productivity of British business.^[229]

From Q2 2013, the UK's economy continued to grow for five consecutive quarters, the longest since Q1 of 2008,^[230] showing growth beating most developed economies helped by the rebound in the housing market and strong growth in both manufacturing and services industries. The IMF increased UK growth forecasts for 2014 from 1.9% to 2.4% in January 2014.^[231] Subsequently, inflation dropped to a low of 1.6% in Q1 2014.,^[232] unemployment dropped to 6.8% (the lowest level since 2009)^[233] with impressive growth in employment leading to an all-time high of 30.4 million.^[234] The UK government posted a £107.6 billion national deficit for the fiscal year ending March 2014, meeting the target of £107.7 billion set a month previously.^[235] This was especially impressive since many countries in the EU, more specifically in the Euro, were stagnating such as France and Italy.^[236] However, it has been argued that the economic recovery is not reaching the majority of the people in the country, with wage growth not keeping up with inflation, however in 2014 it improved with wage growth outpacing inflation for the first time after six years.^[237]

First World War

• Adams, R. J. Q. "Delivering the Goods: Reappaising the Ministry of Munitions: 1915–1916." Albion: A Quarterly Journal Concerned with British Studies (1975) 7#3 pp: 232–244 in JSTOR
• Baker, Charles Whiting (1921). Government control and operation of industry in Great Britain and the United States during the World War. New York: Oxford University Press.
• Burk, Kathleen. Britain, America and the sinews of war, 1914-1918 (1985) online free
• Great Britain. Ministry of Munitions. History of the Ministry of Munitions (8 vol. 1922), online free
• Grieves, Keith. The politics of manpower, 1914-18 (Manchester UP, 1988).
• Hancock, W.K. and M. M. Gowing. British War Economy (1949) pp 3–40 online
• Hurwitz, Samuel J. (1949). State Intervention in Great Britain: Study of Economic Control and Social Response, 1914–1919. Routledge. ISBN 9781136931864.
• McVey, Frank L. The financial history of Great Britain, 1914-1918 (1918) online free
• Whetham, Edith H. The Agrarian History of England and Wales: Volume VIII: 1914–39 (Cambridge University Press, 1978), pp 70–123

Primary sources

• Bland, A.E., P.A. Brown and R.H. Tawney, eds. English economic history: select documents (Macmillan, 1919). online 733pp; covers 1086 to 1840s.
• Pollard, Sidney and Colin Holmes, eds. Documents of European Economic History: Process of Industrialization, 1750-1870 v. 1 (1968) passim.
  • Pollard, Sidney and Colin Holmes, eds. Documents of European Economic History: Industrial power and national rivalry 1870-1914 v. 2 (1972) passim
  • Pollard, Sidney and Colin Holmes, eds. Documents of European Economic History: The End of the Old Europe 1914-1939 v. 3 (1972) passim
• Tawney, R. H., and Eileen Power, eds. Tudor Economic Documents (3 vols. 1924). vol 1 on agriculture and industry