An economic collapse is a situation where the value of goods and services within an economy suddenly decreases, leading to a severe economic depression. This can be caused by a variety of factors, including hyperinflation, government mismanagement, natural disasters, financial crisis, political instability, or a combination of these.
During an economic collapse, people experience extreme poverty and unemployment, and the level of investment in the economy decreases drastically. It can also lead to a decrease in the purchasing power of the currency, an increase in the cost of living, and a decrease in the level of economic growth.
While economic collapse sounds like something out of Armageddon, it can actually be a regular occurrence. For example, in the last century or so, the UK has seen a number of challenging times for the economy ….
Recent historical economic collapses in the UK
1900–1914: The UK entered the 20th century in a state of economic prosperity. However, the outbreak of World War I caused a sharp decline in economic activity. Wartime spending fuelled inflation, leading to a period of economic contraction and recession known as the Great Depression.
1920s: After the war, the British economy slowly recovered, but the economic boom of the 1920s was short-lived, as the worldwide economic depression of 1929 caused a rapid decline in economic output and employment.
1930s: The economic crisis of the 1930s hit the UK harder than most other countries, as industrial production and exports plummeted, unemployment soared, and the national debt ballooned. The crisis was aggravated by a lack of government intervention, leading to mass poverty and social unrest.
1945 –1955: The post-war years saw an economic revival in the UK, as the government implemented an ambitious programme of economic planning and reconstruction. This allowed the country to achieve high rates of economic growth, but it was also accompanied by rising inflation and social tensions.
1956-1957: The Suez Crisis. During the 1950s, the UK enjoyed a time of post-war prosperity. Prime Minister Harold Macmillan announced that the majority of the nation had “never had it so good”. However, this period of affluence was cut short when the Suez Crisis occurred in 1956, leading to an economic downturn.
1975–1981: The UK entered a period of economic contraction and recession in the mid-1970s, as a result of the oil crisis, rising inflation, and a global recession. This resulted in a sharp decline in industrial production, rising unemployment, and a weakening currency.
1982–1992: The UK economy began to recover in the 1980s, as the government implemented a series of economic reforms, including the deregulation of financial markets and restrictions on trade unions. However, the recession of the early 1990s caused another sharp decline in economic activity.
1993–2008: The UK economy experienced a period of sustained growth in the 1990s and early 2000s, as a result of a strong labour market, low inflation, and the globalisation of goods and services. However, the financial crisis of 2008 caused a dramatic downturn in economic activity, leading to a deep recession in 2009.
2009–2020: After the financial crisis, the UK economy has seen a slow but steady recovery, as the government implemented a series of fiscal and monetary measures to boost demand.
2020-date: The economic collapse due to the Covid-19 pandemic has been a rapid and unprecedented event. The global economy has experienced significant disruption as countries have implemented lockdowns and restrictions on movement, leading to a significant decrease in economic activity and resulting in job losses, business closures, and a sharp decline in global GDP.
- In the United States, the Bureau of Labour Statistics reported that the unemployment rate rose from 3.5% in February 2020 to 14.7% in April 2020. The US Bureau of Economic Analysis reported that GDP fell by an annualized rate of 32.9% in the second quarter of 2020.
- In Europe, Eurostat reported that the Eurozone experienced its steepest recession on record in 2020, with GDP falling by 8.7%. The UK’s Office for National Statistics reported that the UK’s GDP fell by 20.4% in the second quarter of 2020.
- In India, the National Statistical Office reported that the economy contracted by 23.9% in the second quarter of 2020. The United Nations Economic Commission for Latin America and the Caribbean reported that the combined GDP of the region fell by 8.2%.
The economic collapse due to the Covid-19 pandemic has been a severe and far-reaching event, with the effects being felt around the world.
So, how can you prepare for a recession?
1. Have a Plan: Being prepared for a UK economic collapse starts with having a plan. Consider what resources you have and what you need in case of an economic crisis. This includes having a budget, an emergency fund, and supplies such as food, water, and medications. It is also important to have a plan for communication with your family and friends in case of an emergency.
2. Save Money: In the event of an economic collapse, having a financial cushion is essential. Start by trimming your budget wherever possible and putting the extra money into a savings account or an investment account. You may wish to consider diversifying your portfolio to include investments in different asset classes, such as stocks, bonds, and commodities.
3. Reduce Debt: In a time of economic crisis, having less debt can make a huge difference. Pay off any high-interest debt such as credit cards or loans and consider consolidating your debt if you have multiple loans.
4. Stockpile Supplies: Having a stockpile of essential items can help you weather an economic collapse. Stock up on non-perishable food items, water, medications, and other essential items. Consider purchasing a generator and other emergency supplies that can help you be self-sufficient in the event of a crisis.
5. Stay Informed: Keep up to date with the news and be aware of any potential economic changes that could affect the UK economy. This includes monitoring the currency markets, government policies, and international events. Understanding the potential risks and being prepared to act quickly can help you weather an economic crisis.
6. Consider Bartering: When money is tight, bartering can be an effective way to get what you need. Consider what skills or items you have to offer in exchange for goods or services. This can be especially useful in times of crisis when money is scarce.
7. Invest in Gold and Silver: Gold and silver are traditionally considered safe havens during times of economic uncertainty. Investing in gold and silver may be a way to protect your wealth during a crisis.
8. Consider Relocation: If you are able, consider relocating to a more financially secure area. This could be a region with a more diversified economy or one that is more insulated from economic downturns.
9. Grow Your Own Food: Growing your own food is a great way to be prepared for an economic collapse. Investing in a home garden or joining a local community garden can help you become more self-sufficient and save money in the long run.
10. Use Your Home’s Equity: If you own a home, consider tapping into your home’s equity as a way to weather an economic crisis. This can be done through a remortgage. Be sure to research the terms and conditions carefully and discuss this with your mortgage adviser.
11. Educate Yourself: Having a strong understanding of the economy can be a great way to prepare for an economic collapse. Read books, take classes, and stay informed on current economic trends. This can help you make more informed financial decisions during a crisis.
12. Build a Network: Having a network of people you can rely on in times of crisis can be invaluable. Make connections with people who have skills and resources that could be useful in a crisis, such as farmers, mechanics, and entrepreneurs.
13. Seek Professional Advice: If you are concerned about how an economic collapse could affect your finances, consider seeking professional advice. Financial advisers can help you assess your current financial situation and make a plan for the future.
Summary
It can be easy to get caught up in fear and panic when faced with an economic collapse. It is important to stay positive and focus on the things you can control. Look for opportunities to help others and stay connected with your community.
Please note that the information within this article is designed to provide ideas and information. It is not financial advice. Always seek independent professional financial advice.
