Study Notes

UK Policy Responses to the Global Financial Crisis

Level:
A-Level, IB
Board:
AQA, Edexcel, OCR, IB, Eduqas, WJEC

Last updated 15 Jan 2023

Here is a short summary of some of the macro and microeconomic policy responses to the 2007-2008 Global Financial Crisis implemented in the UK.

The global financial crisis of 2008 had a significant impact on the UK economy, and the government implemented a number of policy responses to stabilize the financial system and stimulate economic growth. Some of the main policy responses in the UK include:

  1. Bank nationalisation: The UK government took steps to stabilise the banking system by nationalizing several major banks, including Royal Bank of Scotland (RBS) and Lloyds Banking Group, in order to ensure that they had sufficient capital to continue lending to businesses and households.
  2. Fiscal stimulus: The UK government implemented a fiscal stimulus package, which included increased government spending and tax cuts, in order to boost economic activity and employment.
  3. Monetary policy: The Bank of England (BoE) implemented monetary policy measures, such as lowering interest rates from 5.5% to 1% and introducing quantitative easing, in order to stabilise the economy and encourage growth.
  4. Financial regulatory reform: The Financial Services Act of 2012 was introduced in the UK to reform the financial sector and increase transparency and oversight in the financial industry, and strengthen consumer protections.
  5. The Funding for Lending Scheme (FLS): The FLS was launched in 2012 with the aim of increasing the availability of credit to households and businesses by providing banks and building societies with funding at low rates on the condition they lend to these sectors.
  6. Support for the real economy: The government introduced several measures to support the real economy, such as the Enterprise Finance Guarantee Scheme, which provided guarantees to banks to lend to small and medium-sized enterprises (SMEs).
  7. Deposit protection: The government also introduced a deposit protection scheme, which insures depositors' (savers') money up to a certain amount, in order to protect households and businesses in the event of one or more bank failure(s).

These were some of the main policy responses that the UK government implemented in response to the global financial crisis of 2008.

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