Remember that period of unbroken UK GDP and economic growth from 1992 to 2007? In 2008 it started to feel like a distant dream.
In January 2008 the books of Northern Rock were added to the national debt, effectively nationalising the company, with a formal nationalisation following in Feb 2008. Bradford & Bingley was also nationalised later in the year.
As losses racked up in the financial sector, compounded by some rash mega-mergers and acquisitions, the British government had to bail out the banking sector as a whole in Oct 2008, much as was happening in the US and Europe. In total 400 billion GBP was committed. This included the injection of capital and underwriting of share issues, debt guarantees and short term loans. The biggest recipients of aid where RBS (Royal Bank of Scotland), HBOS (Halifax Bank of Scotland) and Lloyds TSB. The government later forced the merger of Lloyds TSB and HBOS into the Lloyds Group. Other more limited participants included Abbey, Barclays, HSBC, Standard Chartered and Nationwide.
GDP growth turned negative in Q2, with a technical recession starting in Q3. Chancellor Alastair Darling called it the worst economic scenario since the end of World War II.
As confidence in the British economy dropped, Sterling (or the British Pound, GBP) started to collapse, losing approximately 30 per cent against its main trading partners.
With consumer confidence shrivelling and unemployment rising, the retail sector was the next to be hit. Woolworths, a high street name since the 1890’s, before it could reach the redemption of the Christmas sales period, while disappointing sales figures in the crucial December month led a series of other retailers to file for bankruptcy during that period.
Pretty much every other sector of the economy was also in decline by this point.
The two (very small) silver linings in the (very large) dark clouds have been the collapse in commodity prices bringing down inflation, and the weakness of the pound helping position exports and tourism for a quicker rebound than Euro-denominated European countries. However these silver linings were more proof of economic weakness than seeds of economic recovery by December 2008.