It's official, the UK is in recession. Most Britons have known since the moment prime minister Boris Johnson ordered the public to stay at home in March, that the economy would suffer greatly, but this is a landmark moment. Economists will pore over the figures for any signs of improvement, here we look back at the eight recessions – defined as two consecutive quarters of negative growth – in Britain’s modern history.
1956. Two quarters of contraction. A collection of factors led to Britain’s first downturn since the Great Depression, from rising inflation to a credit squeeze caused by a high bank rate. The country was also gripped by major political ructions as the Suez crisis dented Britain’s image in America and weakened its influence in the West.
1961. Two quarters of contraction. The economy contracted 0.5% in the third quarter and 0.2% in the final quarter of the year with interest rates hitting 6.5%. The crunch was largely attributed to high rates and a crossover from the “rolling adjustment” recession seen earlier in the year in America. It was so-called due to the power shift in US industries, notably cars, where consumers began switching to buying foreign owned products.
1973-4. Three quarters of contraction. After over a decade of growth, a double dip recession was on the way. In a feisty decade of tumultuous change, Britain’s economic landscape was overhauled. Traditional industries began to lose their footing as Britain’s post-industrial powerhouses, while high inflation caused industrial disputes over pay. The term “stagflation”, where inflation and unemployment are high and the economic growth rate slows, was born.
Meanwhile, in October 1973, the oil crisis bit. The Organization of Arab Petroleum Exporting Countries proclaimed an embargo on nations, including the UK, seen to be supporting Israel, sending oil prices surging. By December, prime minister Edward Heath introduced the three-day week in an attempt to reduce electricity consumption and conserve coal stocks and a miners’ strike soon followed, and growth slumped -2.7% in the first-quarter of 1974.
1975. Two quarters of contraction. The push and pull between bosses and unions continued while Britain suffered as the economy contracted 1.7% and inflation hit an eye-watering 24.2% in this “double dip” recession.
1980-1981. Five quarters of contraction. Margaret Thatcher had entered Number 10 Downing Street the year before and embarked on a pivotal decade in the history of British economics, as the country moved from a manufacturing to a services economy – underscored by scenes of striking miners and the Big Bang of deregulation in the City in 1987. In 1980, the economy contracted by 2% amid Government spending cuts and, in 1981, deprivation and racial tensions were seen at the root of a series of riots, notably in Brixton, Toxteth in Liverpool and other major cities.
1990-91. Five quarters of contraction. After a decade in power fighting heavy industry, the Iron Lady’s stranglehold on Britain began to fade (she stepped down in November 1990) and her Chancellor oversaw the Lawson Boom. Nigel Lawson’s policies were said to have thrown the country into an inflationary spiral which, with interest rates high, led the country into the European Exchange Rate Mechanism, an attempt to keep a handle on inflation which was near 10%. Ultimately unemployment rose and, in 1992, the UK crashed out of the mechanism on “Black Wednesday” as sterling suffered. Meanwhile in the US the S&L Crisis saw many savings and loans associations - essentially building societies - go bust, with the impact bleeding across the Pond to the UK economy.
2008. Five quarters of contraction, peaking at -2.2% in Q4 2008. The deepest post-war recession saw huge institutions fold and others bailed out by the taxpayers in a global downturn sparked by the US subprime mortgage crisis. In the UK, there was a run on lender Norther Rock while RBS, now NatWest, was among those bailed out – and still remains majority owned by the taxpayer. Simon French, chief economist at Panmure Gordon, comments: “From the perspective of both depth and pace of recovery 2008 stands out as the worst as it took 21 quarters to get back to pre-recession levels. The average across the other recessions was 13 quarters.” Despite much speculation that there would be a “double-dip” recession, it didn’t materialise - albeit with isolated quarters of contraction in 2010-2012 - and the economy was rebuilt with the banks holding much larger cash reserves.
2020. The economy contracted 2.2% in the first quarter of this year, but that barely reflected the huge impact of coronavirus. GDP is expected to fall by a record 20% in the second quarter when official figures are released on Wednesday and the Bank of England is forecasting the worst recession in 300 years as a result of the Covid-19 pandemic, which forced Britain into lockdown.