Black Wednesday
Black Wednesday, or the 1992 sterling crisis, was a financial crisis that occurred on 16 September 1992 when the UK Government was forced to withdraw sterling from the (first) European Exchange Rate Mechanism (ERM I), following a failed attempt to keep its exchange rate above the lower limit required for ERM participation.
The ruling Conservative Party suffered a landslide defeat five years later at the 1997 general election and did not return to power until 2010.
Thus, although the UK had not joined the ERM, at Lawson's direction (and with Prime Minister Margaret Thatcher's reluctant acquiescence), from early 1987 to March 1988 the Treasury followed a semi-official policy of "shadowing" the Deutsche Mark.
[4] This led to Lawson's resignation as Chancellor; he was replaced by former Treasury Chief Secretary John Major who, with Foreign Secretary Douglas Hurd, convinced the Cabinet to sign Britain up to the ERM in October 1990, effectively guaranteeing that the UK Government would follow an economic and monetary policy preventing the exchange rate between the pound and other member currencies from fluctuating by more than 6%.
[7] The UK government attempted to prop up the depreciating pound to avoid withdrawal from the monetary system the country had joined only two years earlier.
[10] Schlesinger told the journalist that "a more comprehensive realignment" of currencies would be needed, following a recent devaluation of the Italian lira.
[15] At 10:30 am on 16 September, the British government announced an increase in the base interest rate, from an already high 10%, to 12% to tempt speculators to buy pounds.
[15] It was later revealed that the decision to withdraw had been agreed at an emergency meeting during the day between Lamont, Major, foreign secretary Douglas Hurd, president of the Board of Trade Michael Heseltine, and home secretary Kenneth Clarke (the latter three all being staunch pro-Europeans as well as senior Cabinet ministers),[16] and that the interest rate hike to 15% had only been a temporary measure to prevent a rout in the pound that afternoon.
[23][24] The Conservative Party government's reputation for economic excellence had been damaged to the extent that the electorate was more inclined to support a claim of the opposition of the time – that the economic recovery ought to be credited to external factors, as opposed to government policies implemented by the Conservatives.
The party's performances in local government elections were similarly dismal during this time, while Labour made huge gains.
Black Wednesday was a major factor in the Conservatives losing the 1997 general election to Labour,[citation needed] who won by a landslide under the leadership of Tony Blair.
The Conservatives failed to gain significant ground at the 2001 general election under the leadership of William Hague, with Labour winning another landslide majority.
