Great Depression in Britain
The Depression and Britain
In Britain the Depression wrecked traditional manufacturing industries. The production of textiles fell by two thirds. Shipbuilding collapsed: in 1933 British yards were producing only 7 per cent of the amount produced in 1914. Between 1929 and 1932 iron and steel production halved.
At the time London was the most important financial center in the world and the pound was a key currency in international trade. In 1931 the value of the pound was reduced and it was no longer linked to the price of gold. These changes were a blow to British pride and further evidence that Britain was losing its place as a great power.
At the time of the Wall Street Crash, Britain was ruled by a Labor government. The crisis undermined the position of the government and led to a split in the Labor Party. The Prime Minister, Ramsay MacDonald, left the Labor Party and set up a coalition government with largely Conservative support.
Caution and cuts in defence
After the Depression, British leaders became very worried about the British Empire. They were not convinced that Britain was rich enough to defend its far-flung Empire. Above all, the government became convinced that they could not afford to fight two wars at the same time - one against Japan to defend the Empire in Asia and another to stop the rise of German power in Europe.
Since the Empire was the first priority, the financial crisis encouraged the British government to take a very cautious approach to Germany.
Ramsay MacDonald responded to the Depression by cutting public spending. The result was a dramatic reduction in spending on defense in the early 1930s. It was not until 1936 that British spending on defense began to rise again. This further weakened Britain's ability to stand up to Hitler. Full-scale rearmament did not occur until 1938.
Cuts in defense spending coincided with a huge increase in German spending on weapons. By 1936 the German air force was close to overtaking in size that of Britain. British generals and admirals became very pessimistic about how well Britain could do in a war.