depression 1929-34

Impact of the Great Depression on Britain

• 929 Wall Street Crash → global trade collapsed by 66% (1929–34).

• Britain’s exports fell by 50%; exports = ⅓ of GNP, so collapse devastated:

  • Coal

  • Cotton

  • Iron & steel

  • Shipbuilding

  • Dock work

• Unemployment rose from 1m (1929) → 2.5m (1930).

• 1931: economy shrank by 5%.

• Government still prioritised defending the pound and staying on the Gold Standard → spending cuts + high interest rates.

Shows Britain entered the Depression already weak; Gold Standard made the crisis worse.

Labour Government’s Failure (1929–31)

Why Labour couldn’t respond effectively

• Huge debts + rising unemployment → internal split.

• Chancellor Philip Snowden insisted on balanced budgets and refused Keynesian public works.

• Keynes recommended government spending to create jobs (roads, construction) → rejected.

• Only major government investment was in defence.

1931 Crisis

• Rumours of an unbalanced budget → US banks panic → sell the pound.

• Pound collapses; government proposes 10% cut in unemployment benefit to reassure financiers.

• Split Labour Party → government resigns (Aug 1931).

Labour’s caution + commitment to orthodoxy worsened the crisis and led to the National Government.

. Leaving the Gold Standard (1931): Turning Point for Recovery

Why Britain left

• International banks held huge reserves of British bonds → feared devaluation.

• Demanded spending cuts before lending more.

• £80m loan nearly exhausted.

• Trigger: Invergordon Mutiny (12,000 sailors protesting pay cuts).

• Five days later → Britain left the Gold Standard.

Immediate effects

• Pound devalued from $4.80 → $3.40.

• British exports became 20% cheaper → more competitive.

• Interest rates cut from 6% → 2%.

• Government borrowing costs fell (bond yields 5% → 3.5%).

• Allowed:

  • Restoration of unemployment benefits (1934)

  • Cheaper loans → house‑building boom (1 in 3 new jobs, 1931–34)

  • Boost to rearmament (from 1935) → revived steel, iron, shipbuilding.

Why Britain recovered faster than Europe

• Devaluation + cheap money + rearmament = major stimulus.

• Britain avoided the worst of the Depression compared to Germany/USA.

use: Strong AO3 point — recovery owed more to leaving the Gold Standard (forced, not planned) than to government strategy.

National Government Policies (1931–39) - Spending cuts + Means Test

• Public sector pay cut by 10%.

• Means Test introduced for unemployment assistance → deeply unpopular.

• Cuts stabilised finances but worsened hardship.

Special Areas Act (1934

• argeted aid to Tyneside, south Wales, west Cumberland, Scotland.

• Investment minimal → largely ineffective.

• Example: new steelworks at Ebbw Vale helped, but too late.

Hunger Marches

• Organised by National Unemployed Workers’ Movement (NUWM).

• Protested Means Test + unemployment.

• Most famous: Jarrow Crusade (1936) from Tyneside → symbol of regional neglect.

: Shows National Government stabilised finances but failed to address regional inequality or structural unemployment.