What Was the Economic Impact of the First World War on Britain?

Question 1

Why Was There an Impact?- Debt

Answer 1

War lasted longer than expected- had to loan money from Wall Street- debt of £850 million

Question 2

Why Was There an Impact?- Exports

Answer 2

Cut off from export markets + lost over 3/4 of men- German U-Boat campaign (sank 40% of shipping)
1918- exports fallen by 12%
Japan and American capitalised on war, overtook markets in Asia

Question 3

Why Was There an Impact?- Devaluation

Answer 3

Forced to abandon ‘Gold Standard’, enabled gov. to print more money, but devalued currency
1918- inflation risen to 25%

Question 4

Post-War Boom (1918-20)- Why?

Answer 4

Brief post-war boom, ending in recession
Rationing + restrictions meant people had savings
‘Speculative boom’- amount of shares rose from £65 million in 1918 to £384 million in 1920

Question 5

Post-War Boom (1918-20)- Investors

Answer 5

Investors bought shares in traditional industries (shipyards, cotton mills, and coal yards)
Poor investment choice- market disappeared due to foreign competition (USA + Japan)
Also outdated + received little investment in war years + after war (new industries- electrical goods, automobiles)
Global trade severely depressed during war, didn’t recover well, time to change from war to civilian

Question 6

Recession + Collapse of Heavy Industry (1920-21)- Government Action

Answer 6

Cut spending by 75% to reduce debt (1918-20), raised interest rates to 7%
Expensive to borrow money- drop in investment

Question 7

Recession + Collapse of Heavy Industry (1920-21)- Global Economy

Answer 7

No longer dominated by Britain Textiles, Japan supplying India + Asian with cotton + silk, collapse of textile industry in NW England
Steel- 1920, Brit manufacturers imported American steel- high quality + low price
1937, Britain producing 83,000 tonnes, America producing 210,000 tonnes (per year)

Question 8

Recession + Collapse of Heavy Industry (1920-21)- Recession + Hardest Hit

Answer 8

Severe slump- unemployment 12%
Bad in Wales + Tyneside- majority of heavy industry located
Slump in wages, rise in cost of living by 25%- ignited strikes

Question 9

Recession + Collapse of Heavy Industry (1920-21)- Strikes

Answer 9

1919- Lloyd George bought off workers (coal, rail, docking) to prevent strikes- generous pay + working hours
Created 8 hour working day (48 hour week), 13% drop in working hours
Employers paying more for 48 than 60 hours pre-war, clashes + increased union militancy, 32 million days lost to strikes 1919, 84 million 1921