page_title: Economic history of the United Kingdom
section_title: 1945–2001
hierarchical_section_title: Economic history of the United Kingdom / 1945–2001
caption_attribution_description: English: UK annual balance of trade in goods since 1870 (£m)
context_page_description: The economic history of the United Kingdom relates the economic development in the British state from the absorption of Wales into the Kingdom of England after 1535 to the modern United Kingdom of Great Britain and Northern Ireland of the early 21st century.
  Scotland, England, and Wales shared a monarch from 1601 but their economies were run separately until they were unified in the 1707 Act of Union. Ireland was incorporated in the United Kingdom economy between 1800 and 1920; from 1921 the Irish Free State became independent and set its own economic policy.
  Great Britain, and England in particular, became one of the most prosperous economic regions in Europe between 1600 and 1700, Industrialisation in the UK from the mid-eighteenth century resulted in economic developments described by many historians as the British industrial revolution. These developments resulted in Britain becoming one of the premier economies in Europe during the first half of the 19th century, the most prominent industrial power in the world economy, and a major political power. Its industrialists were major innovators in machinery such as steam engines, textile equipment, and tool-making.
context_section_description: Although Britain achieved ultimate victory in the war, the economic costs were enormous. Six years of prolonged warfare and heavy losses of merchant shipping meant that Britain had lost two-thirds of her pre-war export trade by 1945. The loss of her export markets also caused a serious shortage of US dollars, which were crucial to servicing Britain's war debt and maintaining imports from the United States. Most of Britain's gold and currency reserves were depleted and the Government had been forced to sell off the bulk of British overseas assets to fund the war effort. When Lend Lease was terminated by the United States in August 1945, Britain was unable to pay for the import of essential supplies from America. Although the US agreed to cancel $20 million in Lend Lease debt, the UK was forced to obtain a $3.75 billion loan from the United States at 2% interest in December 1945. The US/UK trade imbalance was perilously high, forcing the extension of rationing to lessen the imbalance and preserve precious US dollars for the servicing of loan repayments.
  Successive governments squandered billions of Marshall Plan Aid to support British world power pretensions, and so jeopardised the economic future of Britain. The Labour government chose not to use the $2.7 billion (Germany received $1.7b) in aid for industrial modernization like Germany had. 
  Germany rebuilt factories like the Volkswagen plant in Wolfsburg. Germany, France and Italy were fully re-engineered with all electric rail lines.  In Britain, steam engines, mechanical semaphore signalling and old track would remain into the 1960s. In addition, the road and telecommunications network in Britain remained equally inadequate, ill-maintained and out-of-date.
  By 1950-1 the UK still spent 7.7% of GNP on defence while Germany and Japan spent nothing.
  In the 1945 general election, just after the end of the war in Europe, the Labour Party led by Clement Attlee was elected with a landslide majority (its first ever outright majority), introducing sweeping reforms of the British economy. Taxes were increased, industries were nationalised, and the welfare state with the National Health Service, pensions, and social security was expanded. Most rations were lifted by 1950, with a few of them remaining until 1954.
  The next 15 years saw some of the most rapid growth Britain had ever experienced, recovering from the devastation of the Second World War and then expanding rapidly past the previous size of the economy. The economy went from strength to strength particularly after the Conservatives returned to government in 1951, still led by wartime leader Sir Winston Churchill until he retired to make way for Anthony Eden just before his party's re-election in 1955. However, the Suez crisis of 1956 weakened the government's reputation and Britain's global standing, and prompted Eden to resign in early 1957 to be replaced by Harold Macmillan.
  By 1959, tax cuts had helped boost living standards and allow for a strong economy and low unemployment, with October 1959 seeing the Tories win their third consecutive general election with a greatly increased majority, which sparked public and media doubt regarding Labour's chances of future election success. Labour leader Hugh Gaitskell then drew a new economic plan for the party, heavily based on the success of the centralised industries of France and West Germany, by the 1960s the latter's economy surpassing the UK for the first time since 1915 as Europe's largest economy. Harold Wilson and Anthony Wedgwood Benn further developed the idea, becoming the backbone of the party's manifesto for the 1964 election.
  Britain's economy remained strong with low unemployment into the 1960s, but towards the end of the decade this growth began to slow and unemployment was rising again. Harold Wilson, the Labour leader who had ended 13 years of Conservative rule with a narrow victory in 1964 before increasing his majority in 1966, was surprisingly voted out of power in 1970. The new Conservative government was led by Edward Heath.
  During the 1970s Britain suf
caption: UK annual balance of trade in goods since 1870 (£m)
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