Great Depression in the United Kingdom

The United Kingdom economy had been severely damaged by World War 1 by serious human losses, to which were added the losses of many of its overseas markets and many of its overseas assets. Recovery was hampered by a severe post-war depression and - after rejoining the gold standard in 1925 at its pe-war parity with the dollar - by an overvalued currency and a struggle to resist massive gold outflows to the United States. (It was in an attempt to stem those outflows that the Bank of England persuaded the Federal Reserve Bank to engineer a monetary expansion in 1927.) The economy suffered a sharp "slump" (the term used in Britain to denote its share of the great depression) between 1929 and 1931, and the government was then forced by further ouflows, to leave the gold standard - after which the economy showed a steady export-led recovery. There was considerable labour unrest but no banking crisis.

The Bank of England raised its discount rate in steps from 4.5% in 1928 to a peak of 6% in 1929, reduced it in steps to 2.5% in early 1931, raised it again to 6% in late 1931 and then reduced it to 2% in 1932. There was a budgetary swing from a surplus of 0.4 per cent of GNP in 1929/30 to a deficit of 1.3 per cent of GDP in 1932/3. The "General Tariff" of 1932 imposed a 10% tax on all imports except raw materials - with later relaxations for imports from the British Commonwealth.