April 20, 2009 / 11:46 AM / 9 years ago

TIMELINE-Britain mired in recession

April 20 - British finance minister Alistair Darling presents his annual budget to parliament on Wednesday and is set to take an axe to his economic forecasts and admit the economy looks set for its deepest downturn since World War Two.

Here is a timeline of the British economy since the U.S sub-prime lending crisis caused credit markets to seize up, triggering a run on U.K. mortgage bank Northern Rock.

Sept 2007 - Northern Rock says the Bank of England has stepped in to provide support, triggering the first run on a major British bank in over a century following the U.S. subprime crisis.

Feb. 2008 - Darling announces the temporary nationalisation of Northern Rock after rejecting two bids - from Virgin and a rival ‘in-house’ offer led by the bank’s management team - to take it over.

April. 2008 -- The BoE unveils the Special Liquidity Scheme to swap banks’ risky mortgage assets for at least 50 billion pounds of government debt.

Sept. 2008 - Lloyds TSB agrees to rescue rival HBOS in a bid to scoop up Britain’s biggest home loan lender to create a 28 billion pound ($40.89 billion) mortgage company.

Sept. 2008 - Bradford & Bingley, the country’s ninth-biggest mortgage lender, is nationalised. The Treasury said it would take over B&B’s 50 billion pound mortgage portfolio and sell its deposits and branches to Spanish bank Santander.

Oct. 2008 - The government bails out three major banks - Royal Bank of Scotland, Lloyds TSB, and HBOS with a 37 billion pound cash injection aimed at strengthening their capital reserves in the face of the credit crunch.

Nov. 2008 - The BoE makes a shock 1.5 percentage point cut in interest rates to just 3 percent, their lowest level in more than half a century.

-- BoE governor Mervyn King says the economy will shrink sharply in 2009 and inflation could fall below 1 percent in two years.

-- Darling says he will cut sales tax and extend help for small businesses, low earners and households in a new stimulus package worth some 20 billion pounds.

-- The board of high street store Woolworths places its retail business and entertainment wholesale distribution business into administration.

Jan. 2009 - The BoE cuts interest rates by 50 basis points to a record low 1.5 percent. The rates are now at their lowest level since the bank was founded more than 300 years ago.

-- Britain launches a second bank rescue plan, under which the BoE will set up an asset purchase programme to buy private sector assets with an initial fund of 50 billion pounds.

-- Britain’s public finances deteriorate sharply as the recapitalisation of ailing RBS blows out the deficit to 44.2 billion pounds last month, its highest on record.

-- The pound falls to a 7-1/2 year low against the dollar below $1.38 on Jan. 21 as worries about the banking sector and public finances continue to batter the currency.

-- Britain enters recession for the first time since 1991 as official figures show output has contracted by 1.5 percent in the final three months of 2008. The economy is shrinking at its fastest pace since 1980.

Feb. 2009 - The BoE cuts interest rates by another 50 basis to another record low of 1.0 percent.

-- The Royal Bank of Scotland reported on Feb. 26 reported a loss of 24.1 billion pounds ($34.3 billion) for 2008, the biggest in UK corporate history.

March 2009 - The BoE cuts interest rates by another 50 basis points to 0.5 percent, and says it will buy assets worth 75 billion pounds in a drive to help the British economy by expanding the money supply.

-- British industrial output, which makes up 18 percent of the economy, falls 2.6 percent in January alone and is down 11.4 percent on a year ago, official data shows.

-- The economy shrinks even more abruptly than expected in the last three months of 2008 - by 1.6 percent, the sharpest decline since 1980.

-- The ILO measure of unemployment rises by 165,000 in the three months to January to 2.029 million -- the highest since the ruling Labour party took power in 1997.

April 2009 - G20 leaders gathering in London, agree to commit new resources of $1.1 trillion available to the world economy through the IMF and other institutions.

-- Darling acknowledges he does not expect Britain to come out of recession before the end of the year at the earliest.

-- The BoE leaves interest rates unchanged for the first time since September and says it will continue with its asset purchase programme.

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