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A Guide to the Financial Crisis in the UK

A financial crisis such as the one that occurred in the mid 2000’s resulted in a national crisis in the UK, recession and depression in the country’s economy, in businesses and in society in general. This was, and still is, seen as a catastrophic event with the fallout continuing today in many modern European countries like Greece, Spain and Portugal. There were many factors that contributed to the so-called credit crunch, not least the instability of the financial markets, which caused the flow of money to come to a stop – thereby restricting all forms of credit and new loans. It also birthed the direct lender payday loans revolution. Other factors like cheap credit that had spiralled out of control and risky mortgages, which had become commonplace between the years 2000 and 2007, helped to take the UK to the brink of financial ruin in the autumn of 2008.

Table of Contents

Ch. 1 – How Mortgage Lending Led to the Banking Crisis Ch. 10 – UK Government Measures Taken During the Financial Crisis
Ch. 2 – The Credit Crunch & the Financial Crisis Ch. 11 – Nationalisation of UK Banks
Ch. 3 – How Credit Card Debt Effects the UK Economy Ch. 12 – Banking Regulations and Reforms after the Credit Crunch
Ch. 4 – How the Financial Crisis Affected Families Ch. 13 – Recovering from the Crisis – Fiscal Stimulus
Ch. 5 – The Financial Crisis & the Housing Market Ch. 14 – Recovering from the Crisis – Quantitative Easing
Ch. 6 – The Impact of the Financial Crisis on the UK Economy Ch. 15 – Changes to Lending Policies
Ch. 7 – How Interest Rates Were Impacted By the Crisis Ch. 16 – Changes in Monetary Policy
Ch. 8 – Global Effects of the Credit Crunch Ch. 17 – How the Global Economy Impacts the UK
Ch. 9 – Who Benefitted from the 2008 Financial Crisis?

History of the Financial Crisis UK

The 2008 depression has become known as the ‘great depression‘. But, prior to this event the biggest depression had happened in the 1930’s when stocks and shares all over the world fell and many people lost their homes and businesses. This caused mass unemployment and poverty on a great scale.

The financial depression of the 1930’s was exited after the world went to war and following a period of austerity during the 1940’s and 1950’s the economy of the UK and other countries began to grow. Full employment ensued in the 1960’s and there was a rise in living standards for everyone. It began to be unthinkable that this kind of recession/depression could happen again on a global scale. However, the financial crisis UK in 2007/2008 proved everyone, from highly regarded economists and government ministers right down to the man on the street, wrong. So, how did it start? Furthermore, who is to blame and what lessons have been learned along the way? We will attempt to answer these questions in the next series of articles.

Causes of Financial Crisis UK

Prior to the period of deregulation, banks were basically organised in two ways. Firstly you have retail banks that you see on the High Street. In the UK these were the big four; Barclays, Lloyds, National Westminster and HSBC (formerly the Midland Bank). Secondly, there is investment banks operating in the UK like JP Morgan and Deutsche Bank were a different kind of financial institution that raised money for businesses, traded on the money markets and were used for arranging mergers and acquisitions. There was a definitive line between these two forms of banking and the many building societies that flourished in the UK were firmly in the former camp.

In the UK there were a lot of reputable building societies that had evolved over many years as a means of providing mortgages for ordinary people. In fact, these were the first port of call for ordinary people who wanted to buy a home of their own. At this point in time banks provided current accounts, business accounts and overdrafts. Furthermore, banks were seen as the lender for business investment and building societies catered for personal mortgages for a home. Hence, you used your cheque book to pay bills.

But, why does all this affect us? And, how did all this change? Read on!

Written by: Isla Williams
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