Early 1980s Recession - Recession in The United Kingdom

Recession in The United Kingdom

As with most of the developed world, recession also hit the United Kingdom at the turn of 1980s, although the economy had been plagued by a string of crises for most of the 1970s and unemployment had gradually increased since the mid 1960s.

When the Conservative Party led by Margaret Thatcher won the general election of May 1979 and swept James Callaghan's Labour Party from power, the country had just witnessed the Winter of Discontent in which numerous public sector workers had staged strikes. Inflation was about 10% and some 1,500,000 people were unemployed; compared to some 1,000,000 in 1974, 580,000 in 1970 and just over 300,000 in 1964. Margaret Thatcher set about to control inflation with monetarist policies and change trade union laws in an attempt to reduce the strikes which had blighted Britain for so many years.

Mrs Thatcher's battle against inflation resulted in the closure of many inefficient factories, shipyards and coalpits – mostly during her first four-year term in power. This helped bring inflation below 10% by the turn of 1982 (having peaked at 22% in 1980) and by spring 1983 it had fallen to a 15-year low of 4%. Strikes were also at their lowest level since the early 1950s.

However, it also resulted in unemployment reaching 3,000,000 by January 1982 – a level not seen for some 50 years. This accounted for some 12.5% of the workforce. Northern Ireland was the hardest hit region, with unemployment standing at nearly 20%. It exceeded 15% in much of Scotland and northern England, only falling below 10% in the south east.

Even the 2,000,000 figure first seen towards the end of 1980 had not been reached in over 40 years.

By April 1983, Britain – once known globally as the "workshop of the world" due to its strong manufacturing base – became a net importer of goods for the first time ever, largely due to the loss of heavy industry under Thatcher. Areas of Tyneside, Yorkshire, Merseyside, South Wales, the West of Scotland and the West Midlands were particularly hard hit by the loss of industry and subsequent sharp rise in unemployment. The national average by January 1982 was around 12.5%, but in some of these regions it was approaching 20% and would remain similarly high for a number of years afterwards.

The mass unemployment and social discontent resulting from the recession were widely seen as major factors in widespread rioting across Britain during 1981 in parts of towns and cities including Toxteth in Liverpool and a number of districts of London.Four years later, in 1985, when the economy had been out of recession for three years but unemployment remained high, there was another wave of rioting across Britain, again with several parts of London being affected among others. High unemployment and social discontent were once again seen as factors in the rioting.

In the first three years of Mrs Thatcher's premiership, opinion polls gave the Tory government approval ratings as low as 25%, with the polls initially being led by the Labour opposition and then by the SDP-Liberal Alliance which was formed by the Liberal Party and the Labour breakaway Social Democratic Party during 1981.

Despite the economic recovery which followed the early 1980s recession, unemployment in the United Kingdom barely fell until the second half of the decade. Unemployment was still in excess of 3 million as late as 1986,but fell below that figure the following yearand by the end of 1989 it had fallen to 1.6 million.