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| Remember the last recession? | Remember the last recession? |
| (about 3 hours later) | |
| By Tom Geoghegan BBC News Magazine The UK's economic output has fallen for the first time since 1992, when the country was emerging from a recession that had lasted nearly two years. So what was Britain like at the start of the last downturn and what's happened to people who suffered then? | By Tom Geoghegan BBC News Magazine The UK's economic output has fallen for the first time since 1992, when the country was emerging from a recession that had lasted nearly two years. So what was Britain like at the start of the last downturn and what's happened to people who suffered then? |
| On 5 December 1990, the UK was enduring a cold snap and on the way was a fierce snowstorm that brought much of the country to a standstill. | On 5 December 1990, the UK was enduring a cold snap and on the way was a fierce snowstorm that brought much of the country to a standstill. |
| Those hoping for a thaw could draw no respite from the music charts, where Vanilla Ice was just beginning his three weeks at the top, with Ice, Ice, Baby. | Those hoping for a thaw could draw no respite from the music charts, where Vanilla Ice was just beginning his three weeks at the top, with Ice, Ice, Baby. |
| The 1990 recession: How the news broke | The 1990 recession: How the news broke |
| Such signs were ominous, for an economic chill had been descending for months and this led Chancellor Norman Lamont to stand up on that day and tell MPs that the UK was entering a recession. | Such signs were ominous, for an economic chill had been descending for months and this led Chancellor Norman Lamont to stand up on that day and tell MPs that the UK was entering a recession. |
| Eighteen years later Prime Minister Gordon Brown has warned of the same possibility and on Friday, GDP figures showed the economy shrank for the first time since the end of that downturn in 1992. | Eighteen years later Prime Minister Gordon Brown has warned of the same possibility and on Friday, GDP figures showed the economy shrank for the first time since the end of that downturn in 1992. |
| Mr Lamont's speech hardly came as a shock. The country's GDP had just recorded its sharpest drop in 10 years and retail sales in October had fallen 1.1%, a much bigger drop than expected. Inflation was in double figures and interest rates were recently as high as 15%. WHAT ELSE HAPPENED IN 1990? Films: Edward Scissorhands, Pretty Woman, Home AloneSport: Gazza cried, Sir Alex Ferguson was seven minutes from the sack as Man Utd managerMusic: Sinead O'Connor, Happy Mondays, Primal ScreamTelevision: Twin Peaks, Baywatch, The SimpsonsIn the news: Geoffrey Howe resigned, Thatcher ousted, 100 British hostages freed by Iraq | |
| The political world was equally stormy. One of Britain's longest serving prime ministers, Margaret Thatcher, had only one week earlier bade a tearful farewell at Downing Street, handing the keys over to John Major. | The political world was equally stormy. One of Britain's longest serving prime ministers, Margaret Thatcher, had only one week earlier bade a tearful farewell at Downing Street, handing the keys over to John Major. |
| After the boom of the 1980s, Britain's hangover was starting to kick in, with bankruptcies and repossessions mounting, and dole queues lengthening. | After the boom of the 1980s, Britain's hangover was starting to kick in, with bankruptcies and repossessions mounting, and dole queues lengthening. |
| Even owners of Michelin-starred restaurants weren't spared. With 30 years of experience in the business, Patrick McDonald, 46, now says 1991 was financially his toughest year. | Even owners of Michelin-starred restaurants weren't spared. With 30 years of experience in the business, Patrick McDonald, 46, now says 1991 was financially his toughest year. |
| He had opened his bistro in the spring of 1990 but 18 months later it went under, despite being part of one of the top restaurants in the country at the time: The Epicurean in Stow-on-the-Wold. What's the real impact of the economic slowdown? BBC News is taking the temperature across the UK in a special day of coverage Special report: The downturn | He had opened his bistro in the spring of 1990 but 18 months later it went under, despite being part of one of the top restaurants in the country at the time: The Epicurean in Stow-on-the-Wold. What's the real impact of the economic slowdown? BBC News is taking the temperature across the UK in a special day of coverage Special report: The downturn |
| "The recession bit harder and harder and harder and one of the high street banks we were mortgaged with decided that it was vulnerable and they called in the mortgage even though we had been paying it. | "The recession bit harder and harder and harder and one of the high street banks we were mortgaged with decided that it was vulnerable and they called in the mortgage even though we had been paying it. |
| "It was not only my business but a home for my wife and children. It put us under immense pressure because we didn't have a home to live in." | "It was not only my business but a home for my wife and children. It put us under immense pressure because we didn't have a home to live in." |
| He put the property into voluntary liquidation but before literally throwing the keys at the bank representatives, he stripped out all the fittings - radiators, lights, water boiler - and sold them back to the business that moved in. That enabled him to pay back some of the creditors.Mr McDonald bounced back from his bistro going under | He put the property into voluntary liquidation but before literally throwing the keys at the bank representatives, he stripped out all the fittings - radiators, lights, water boiler - and sold them back to the business that moved in. That enabled him to pay back some of the creditors.Mr McDonald bounced back from his bistro going under |
| But he bounced back. The family rented a home, he later set up a consultancy advising chefs and his comeback was sealed when he became one of the first television chefs to host a reality show - Channel 4's If You Can't Stand The Heat. | But he bounced back. The family rented a home, he later set up a consultancy advising chefs and his comeback was sealed when he became one of the first television chefs to host a reality show - Channel 4's If You Can't Stand The Heat. |
| "I've been knocked down a few times but come through. I've employed thousands of people over 30 years and created a lot of jobs and if I was to sit back and not do anything I would be nothing." | "I've been knocked down a few times but come through. I've employed thousands of people over 30 years and created a lot of jobs and if I was to sit back and not do anything I would be nothing." |
| A year after the bistro closed, another small business was folding a couple of hundred miles east, in Norwich. | A year after the bistro closed, another small business was folding a couple of hundred miles east, in Norwich. |
| Severe struggle | Severe struggle |
| Tom MacKeown set up Rags to Riches in 1985, designing and selling upmarket women's wear, but a few years later its troubles began, when the pound suddenly climbed nearly 15% in value against other currencies, making its exports very expensive. Coupled with two wet summers washing out the county shows at which he sold, it was a fatal blow. We struggled severely for two years Tom MacKeown | Tom MacKeown set up Rags to Riches in 1985, designing and selling upmarket women's wear, but a few years later its troubles began, when the pound suddenly climbed nearly 15% in value against other currencies, making its exports very expensive. Coupled with two wet summers washing out the county shows at which he sold, it was a fatal blow. We struggled severely for two years Tom MacKeown |
| "It was one of the first times when the pound climbed against the other currencies, so our clothes became unaffordable. | "It was one of the first times when the pound climbed against the other currencies, so our clothes became unaffordable. |
| "And because we had borrowed fairly extensively to expand, without the turnover there was no profit margin to pay the bank and we closed the business in 1992." | "And because we had borrowed fairly extensively to expand, without the turnover there was no profit margin to pay the bank and we closed the business in 1992." |
| The family kept their house but struggled severely for a few years as they paid back creditors, giving up their car and holidays abroad. Now Mr MacKeown runs a building firm called Designer Stubble that uses natural materials like straw and clay, and he says that as long as there is enough to feed his four children, then he's happy. | |
| The problems with the value of sterling, that contributed to the downfall of his business, were at the heart of the economic problems of the times. | |
| With interest rates rising and house prices tumbling, the obvious solution would have been to lower interest rates. But the government's economic policy was built around shadowing the strong German mark - as part of British membership of the Exchange Rate Mechanism or ERM. | With interest rates rising and house prices tumbling, the obvious solution would have been to lower interest rates. But the government's economic policy was built around shadowing the strong German mark - as part of British membership of the Exchange Rate Mechanism or ERM. |
| Although the UK was technically out of recession by the time it left ERM on so-called Black Wednesday in September 1992, its effect continued to be painfully felt, especially in areas that remained in negative equity. | Although the UK was technically out of recession by the time it left ERM on so-called Black Wednesday in September 1992, its effect continued to be painfully felt, especially in areas that remained in negative equity. |
| Sarah Stewart, now 48, believes it cost her marriage. Three years after buying her flat in Newcastle for £18,000 in 1991, she moved south to start a new job and tried to sell it but it was now worth less than she paid for it. | Sarah Stewart, now 48, believes it cost her marriage. Three years after buying her flat in Newcastle for £18,000 in 1991, she moved south to start a new job and tried to sell it but it was now worth less than she paid for it. |
| An offer came in for £15,000 but the lending bank - as many did at the time - said that was too low. Meanwhile it was regularly getting broken into, so repair costs were mounting. | An offer came in for £15,000 but the lending bank - as many did at the time - said that was too low. Meanwhile it was regularly getting broken into, so repair costs were mounting. |
| "I handed back the keys because I couldn't cope with it anymore," says Ms Stewart, who is now a city councillor on the south coast.Brown followed in Lamont's footsteps | "I handed back the keys because I couldn't cope with it anymore," says Ms Stewart, who is now a city councillor on the south coast.Brown followed in Lamont's footsteps |
| "I was so close to having a nervous breakdown and I just knew I had to get shot of it. I thought that was it, until five years later, when I had my first baby, a letter arrived on the doormat from the bank, saying they sold it for £1,300 and so I owed them £17,000." | "I was so close to having a nervous breakdown and I just knew I had to get shot of it. I thought that was it, until five years later, when I had my first baby, a letter arrived on the doormat from the bank, saying they sold it for £1,300 and so I owed them £17,000." |
| After a two-year battle, the bank finally settled at a much lower amount, but by then the fight had cost Ms Stewart her husband, who had enough, and the financial repercussions remain. | After a two-year battle, the bank finally settled at a much lower amount, but by then the fight had cost Ms Stewart her husband, who had enough, and the financial repercussions remain. |
| "I've never recovered my earning potential. I lost two years of my life fighting this claim, then years and years of never being able to buy another house. | "I've never recovered my earning potential. I lost two years of my life fighting this claim, then years and years of never being able to buy another house. |
| "It really affected me long-term. My husband left me, leaving me bringing up two kids on my own." | "It really affected me long-term. My husband left me, leaving me bringing up two kids on my own." |
| As a new recession looms, scars from the last one suggest it will be a long road to recovery. | As a new recession looms, scars from the last one suggest it will be a long road to recovery. |
| Add your comments on this story, using the form below. | Add your comments on this story, using the form below. |
| In the early 90s I'd recently bought a house on an interest only mortgage with little equity following a divorce. The value of the house dropped into negative equity and interest rates hit 15%. I was unable to sell and ended up servicing the mortgage using an overdraft. It took me over 5 years to clear the overdraft. I still live in the same house but now the mortgage is only about 40% of the property value, even allowing for the depressed housing market. If I can stay employed during the current recession I'll be happy (no certainty there as I'm an IT worker for an investment bank). Rob Lovett, Swindon, UK | |
| I remember the last recession in the early nineties, but I was 17 years old at the time. I was an A-level student living at home; I had no job, no mortgage, no debts. "The recession" was just some boring rubbish that they talked about on the news. I was more interested in girls and the Happy Mondays. This time, though - as an employed homeowner juggling rising fuel bills with credit card debts - I am realising what all the concern was about.Dave Damon, Huddersfield, UK | |
| Anyone under about 38 will probably not have experience of what the recession of the early 90s was like. I was made redundant twice in the 90s and with a young family with just one income it was quite unpleasant. Negative equity will be a new experience for many who have over stretched themselves in a housing market that just had to nowhere else to go but down (50% I would guess). Perhaps this is the reality check we all need? Nick, Gosport | |
| I remember the recession very well, me and my boyfriend had just bought our first house and moved in after renovating for over a year in December 1990 by January 1991 my boyfriend had been made redundant, as he had been with the firm for less than 2 years he didn't receive any redundancy pay, he was out of work for 10 weeks, so I suppose we were lucky, but during those 10 weeks it was so very difficult, as we weren't married we didn't get any financial help whatsoever, our house had devalued so we couldn't sell up, but in 2000 we sold that house and made a huge profit, so there is hope when the recession is over.Elaine, Coventry, England | |
| Fortunately we have a more credible monetary policy than in the 90's; a more experienced prime minister and better social agenda that looks out for people. It's not avoiding the knocks that is a measure of leadership, it's how you deal with them.Ben, Bristol | |
| I don't think the recession of the early eighties ever really ended for some: I left school in 1985 to almost zero employment for fellow pupils, went to college and qualified just in time for the nineties one, and by then employers were wise to how desperate people were for a gainful job. All around me friends were being bullied into minimum-wage jobs due to fear of being on benefits. I was dumped by such an employer at the end of last year (thankfully). Scraping around for bits of work has been a necessity to a large part of the population for years - so I might ask 'what recession'?Grrr Jordan, Wirral | |
| I worked as an Administrator at a building society that was known for risky mortgages. When the recession hit, it got taken over and most of us were made redundant. After 3 months of not being able to get a decent job I became a cocktail bartender then went to do some further studies. I'm now a University lecturer. Sometimes these things work out for the better.Bob, London | |
| I was too young to know much about the last recession but my dad told me the other day that business got so bad they were weeks away from having to sell our family home. I was so shocked that they had been through that hell and I'd been so blissfully unaware. I feel desperately for all the men today who are in the same position as my father was then, with kids to support and a home to look after.SF, Reading | |
| My girlfriend (now my wife) and I bought a flat in Northolt in 1988 for £65,000. A few years later it was worth £35,000 - £40,000, and we had a 100% mortgage. We couldn't sell the flat because of negative equity, so we rented it out and went abroad until 2001, which was the best thing we ever did!Backrubber, Hitchin, UK | |
| What baffles me is how quickly folks seem to forget, and how those in politics and finance have the gall to feign surprise. I was only 18 at the time of the last recession, and I'm certainly no expert in economics, but it was so blatantly obvious that this was going to happen again, I've been warning friends for the past three or four years to downsize, or even sell up and rent for a year or two, until prices drop. The banks' iniquitous policy of offering huge mortgages (on the basis that price houses will rise - a self-fulfilling prophecy, as it is precisely this easy availability of money that pushes prices up) is largely to blame. The markets had clearly got unsustainably high, and the bubble was just waiting to burst. I expect people will blame the government for the recession, and I can't say I entirely disagree, but then again, last time round, as the article points out, the Tories had been in power for over a decade. They're all as bad as each other. End of rant. Caroline, Italy | |