Black Wednesday occurred on 16 September 1992, it was a day that saw the British government faced one of the biggest financial crisis in history, it was a day when the Bank of England lost billions and speculators made fortunes, a day of disaster from which the government never recovered.
Margret Thatcher put Britain on the road to Black Wednesday, the economy was in crisis, and in her own party, the knives were out for the Priminister. Her Chancellor John Major suggested a rescue plan, he believed that joining the European exchange rate mechanism would be both good for her and the economy but Margret Thatcher detested the idea of putting the British pound into europe but most Tory MP’s supported it and she knew years of division had to end.
It would be a revolution, the pounds value would be locked against the German Deutsche Mark and other European currencies, it could vary but only a little. In order to maintain the value of the pound, British interest rates had to match German ones. In theory, the pound would then be stable equally attractive to investors. Whatever the Germans did to their interest rates the British would have to do the same, the hope was that German discipline would give Britain a stable pound, low inflation, and German-style prosperity.
It was a high-risk strategy, nevertheless Margret Thatcher gave the green light the very next day. The hope was it would boost their popularity but this meant going in at the level the pound stood against the Deutsche Mark then which was high. However, Britain was sliding into recession with over 1 million people losing their jobs. The high price of the pound locked inside the ERM meant that businesses struggled to sell their goods abroad. People started selling their houses for less than they had paid. It was a disaster waiting to happen.
Directed by: Steve Hewlett