Black Wednesday

The date, 16 September 1992, exactly 20 years ago, on which the British Government was forced to remove the Pound Sterling from the European Exchange Rate Mechanism (ERM). Britain had joined the system for maintaining fixed exchange rates only a few years earlier but high inflation and poor economic management rendered it untenable and Britain’s exit was the start of a serious recession which led to business failures on a large scale and a major crash in the housing market that left many people with negative equity on their mortgages.

This event came hard on the heels of problems in the corporate world-BCCI, Polly Peck and Maxwell Communications gave the impression that all was not well in the seats of economic and political power.

Various policy initiatives and corporate re-structuring were introduced to address the difficulties but, although they had some success-inflation was brought under control, they did not remove the types of risk from our economic life that led to a series of major problems including the split capital investment fiasco and, more recently, the worst financial crisis since the 1930s.

Arrogance, ignorance and greed continue to be major driving factors in our economic and social lives. It is time for a serious re-think.. Black Wednesday, despite its costs, changed little. It would be a mistake to let the current crisis pass without learning its lessons.