Look back in re­lief on Black Wed­nes­day


FOR any­one with debts then, Black Wed­nes­day, which was 25 years ago to­day, was the eco­nomic equiv­a­lent of their “JFK mo­ment”. When I went to work that morn­ing I left be­hind an 18-month old mort­gage and Min­i­mum Lend­ing Rate (MLR) – that’s what we called Bank Rate in 1992 – of 10 per cent.

I was due to spend the day with col­leagues sup­port­ing the board of a ma­jor con­struc­tion firm in its an­nual strat­egy de­lib­er­a­tions. By mid-morn­ing the ses­sion was well un­der way. Pre­sciently (oh, how pre­sciently!) we had flagged a se­ries of risks to the eco­nomic out­look aris­ing from the UK’s mem­ber­ship of the Ex­change Rate Mech­a­nism (ERM). In­ter­est rates might rise, deep­en­ing and pro­long­ing the re­ces­sion. Per­haps the gov­ern­ment would throw in the towel and leave the ERM. But then what? How would it com­bat in­fla­tion?

Around eleven o’clock came a knock on the board­room door. A woman en­tered and handed the chair­man a piece of pa­per. (Note to younger read­ers: that’s how you got news back then.) “MLR has risen to 12 per cent,” he said. We con­tin­ued through a sand­wich lunch and into the af­ter­noon, dis­cussing all man­ner of is­sues im­por­tant to a con­struc­tion firm. Just be­fore four o’clock, an­other knock. Same woman. Sim­i­lar pa­per. “MLR,” an­nounced the chair­man, “is ris­ing to 15 per cent.” Colour drained from ev­ery face in the room.

The ERM was a pre­cur­sor of the euro. Coun­tries agreed their ex­change rates would move within nar­row bands. Bri­tain joined the ERM in Oc­to­ber 1990 valu­ing the pound at 2.95 deutschmarks plus or mi­nus 2.25 per cent.

A coun­try fixing its ex­change rate when cap­i­tal is free to flow ac­cepts the in­ter­est rate hand mar­kets deal.

For most of its time in the ERM, Bri­tain

There was joy as lend­ing rates fell back again.

en­dured a com­bi­na­tion of re­ces­sion and seven per cent a year price rises. In Ger­many, the post-uni­fi­ca­tion boom pushed in­fla­tion to lev­els they found un­com­fort­ably high, av­er­ag­ing above three per cent. In re­sponse, the Bun­des­bank steadily raised in­ter­est rates. With Ger­man rates ris­ing, keep­ing ster­ling within its ERM bands meant the UK had to ei­ther hike in­ter­est rates or buy pounds.

With 10 per cent un­em­ploy­ment and

1.7 mil­lion house­holds in neg­a­tive eq­uity in­vestors guessed that the Gov­ern­ment would not push in­ter­est rates to lev­els needed to de­fend the pound. And they knew that Bri­tain’s re­serves could stretch only so far. So, they bor­rowed pounds to buy deutschmarks putting fur­ther down­ward pres­sure on ster­ling.

On the evening of Septem­ber 16 the Gov­ern­ment’s will broke: Bank Rate at 15 per cent was un­sus­tain­able.

And with one bound the UK econ­omy was free. Ster­ling fell 10 per cent in two weeks. With the world emerg­ing from re­ces­sion, growth re­sumed, led by ex­ports. In­fla­tion fell and un­em­ploy­ment peaked in early 1993, all this amidst fis­cal aus­ter­ity.

ERM mem­ber­ship was a scar­ring ex­pe­ri­ence, not least for the Con­ser­va­tive Party whose rep­u­ta­tion for eco­nomic com­pe­tence it tor­pe­doed. But the UK even­tu­ally emerged stronger and with an in­fla­tion-fight­ing frame­work that has en­dured. Above all, Black Wed­nes­day prob­a­bly saved us from a worse fate still: mem­ber­ship of the euro. IT sounds like the kind of prod­uct dreamt up in Willy Wonka’s choco­late fac­tory.

A Glas­gow-based sci­en­tist has cre­ated a new style of choco­late bar that is said to taste good while be­ing health­ier than its mar­ket ri­vals.

And de­mand is such that Dr Neil Rob­son and wife Suzanne, own­ers of Rebel Choco­late, are ramp­ing up pro­duc­tion from the cur­rent 200, 90g bars per week to 2,000 by the end of the year.

The hus­band and wife, who met while study­ing towards PhDs in im­munol­ogy at the Univer­sity of Glas­gow, launched Rebel ear­lier this year. Their prod­uct is cur­rently stocked by in­de­pen­dent out­lets such as Pit­ten­weem Choco­late Shop and Kim­bles Café, Deli and Choco­late Shop in Glas­gow, and avail­able

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