Britain's recession record

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The Independent Online

The deepest recession for almost 30 years, triggered by the woes of the banking sector, has seen UK output shrink by 5.9 per cent so far.

The financial crisis and eventual nationalisation of many banks has been the defining feature of the slump, which Lord Turner, the head of the Financial Services Authority, called a "crisis cooked up in trading rooms".

Here is a look at the characteristics and impact of past recessions:

1990-91: GDP decline of 2.5 per cent

The 'Lawson boom' of the late 1980s came to an abrupt end in 1990 as interest rates were jacked up to tackle rising inflation.

The UK's entry into the Exchange Rate Mechanism in 1990 linked the pound to the deutschmark to help keep a lid on the rising cost of living but hit the economy because maintaining the rate meant much higher interest rates - and soaring home repossessions.

Markets reckoned the UK's high interest rates were unsustainable and bet against the pound, eventually forcing a painful exit from the ERM on 'Black Wednesday' in 1992. Rates were raised as high as 15 pe cent to defend the pound before the effort was abandoned.

1979-81: GDP decline of 6 per cent

Margaret Thatcher's incoming Conservative Government unveiled a brutal package of fiscal medicine to tackle the runaway inflation of the 1970s and deep public spending cuts - throwing the economy into reverse.

The Iron Lady gave an early display of her steel with interest rates hiked as far as 17 per cent in late 1979 as she showed her determination to tackle inflation - as well as trade unions - and bury the memory of the UK's humiliating 1976 bail-out by the IMF. Public spending was also slashed and VAT almost doubled.

Mrs Thatcher proved a divisive figurehead for the Government - worshipped and hated in equal measure - but the legacy of her early reforms were dole queues which soared and stayed above three million until 1987.

1973-74: GDP decline of 3.4 per cent

The early 1970s saw Edward Heath's Conservative Government face an oil crisis in 1973 after cartel Opec stopped exports to western nations in response to the US support for Israel in the Yom Kippur war.

Heath was fighting a long-running battle against the coal mining unions after attempting to tackle inflation through lower pay rises. Dwindling coal stocks pushed up prices and led to the introduction of the three-day week.

In February 1974 - during the worst point of the recession - Heath called an election under the slogan "Who Governs Britain?" and lost. A decade of near-stagnation lay ahead before Mrs Thatcher finally broke the mining unions in 1984-5.