Illustration of a stranded bank being rescued by the government

How has the 2008 financial crisis affected the way Brits manage their money?

 

Ten years on from the devastating financial crash of 2008, MoneySuperMarket explores how Brits have since changed the way they manage their money and if popular opinion towards banks has changed.

For the vast majority, the 2008 crash and subsequent bailout of several banks by the UK government had far-reaching and likely painful repercussions.

Through an analysis of customer data and external research, MoneySuperMarket has set out to establish whether the nation has changed the way they look after their money and if an increased scepticism towards banks exists in the aftermath of the financial crisis a decade ago.

Or in other words, have we learned anything 10 years on?

Our research shows a key change in behaviour is that over one-fifth (21 per cent) of British adults are now more likely to avoid putting all their income into one bank account, with Londoners most likely to behave in such a way (41 per cent). Although this money is most likely to be split between multiple bank accounts, it is interesting that five per cent of Brits now believe that hiding all their money in a safe is the safest way of storing it.

Despite this, the majority aren’t worried about taking out a loan – a reported 51 per cent suggested they were still likely or very likely to do so. Though only one per cent would ever do so through a pay-day lender similar to the recently collapsed Wonga.

Our newest generation of adults, 18 to 24 year olds, were also revealed to be the most debt-conscious, with almost half (48 per cent) paying off their credit card in full every month – 21 per cent higher than the overall average.

Following the 2008 crisis, the UK has seen a dramatic fall in interest rates, so it is little surprise that over a third of 18 to 24 year olds (35 per cent) are now unlikely to save money. Even for those older generations who may be deemed more able to save money, over a quarter of respondents answered similarly.

So while the average Brit has adjusted their behaviour with money, what about the changes made by the banks in direct response to the crash? When asked this question, the country made the following conclusions:

  • Over one in five (22 per cent) did not notice any changes that may have been implemented
  • Nearly half, 45 per cent, felt positively about changes the banks and building societies have made
  • Those aged 55 and older were most negative about the changes made (13 per cent)

All in all, in this new era of uncertainty and financial instability, many Brits believe another crash is around the corner. According to the survey results, many speculate the next financial crash will occur within the next four years, or by May 2022.

With the 2008 financial crash triggering a global chain of events, we decided to take a look back and see how it all began.

The Great British Bailout - a timeline

The 2008 financial crisis was one of the worst economic disasters since the Great Depression of 1929. Fittingly then, the period following the financial crisis was referred to as the Great Recession, which saw house prices plummeting and a large increase in unemployment.

Here, MoneySuperMarket takes you through the timeline of events as they unfolded.

September 2007

British bank Northern Rock has borrowed vast sums of money to fund customer mortgages and needs to pay off its debts by reselling these mortgages in the international capital markets. However, the demand for these mortgages is extremely low, leading to the bank facing liquidisation and the need of a loan from the British government. This creates a crisis in public confidence, with customers lining the streets to withdraw their life savings.

February 2008

Following two failed takeover bids, UK Chancellor Alistair Darling nationalises Northern Rock in a “temporary measure”, though it is nearly four years before it returns to the private sector. 

Sally, MoneySuperMarket Expert

March 2008

On the other side of the pond, US investment bank Bear Stearns is bought out by JP Morgan and goes down as the biggest casualty of the crisis up to this point, triggering further instability stateside.

September 2008

The US Government bails out Fannie Mac and Freddie Mac – two massive firms that had guaranteed thousands of financial products known as sub-prime mortgages, which many hold partially accountable for the global financial crash. Over-exposed to the sub-prime mortgage market, iconic American investment bank Lehman Brothers files for bankruptcy, causing financial panic across the world. 

Sally, MoneySuperMarket Expert

The US continues to go on and struggle badly on the stock markets, leading to Goldman Sachs and JP Morgan Chase changing their status to banking holding companies, signifiying the end of the investment banking model popular at the time. Just four days later, American banks Washington Mutual and Wachovia both collapse.

Back on home shores, the UK’s largest mortgage lender, HBOS, is saved by Lloyds TSB after a huge drop in share price and facing the threat of collapse.

After being the first European country to slip into recession, Ireland’s government promises to alter the entire Irish banking system – however, it was unable to live up to this promise as unemployment rose from five per cent to fifteen per cent and property prices dipped by over 50 per cent.

October 2008

Iceland’s three biggest commercial banks – Glitnir, Kaupthing and Landsbanksi collapse. To protect the deposits of their many British customers, UK Prime Minister Gordon Brown controversially uses anti-terror legislation to freeze the assets of the banks’ UK subsidiaries.

During the worst ever week for the Dow Jones, eight central banks (including the Bank of England, European Central Bank and Federal Reserve) cut their interest rates by 0.5 per cent in an attempt to ease the pressure on borrrowers.

Finally, to avert the collapse of the entire UK banking sector, the government makes the decision to bail out several high-profile banks, including the Royal Bank of Scotland, Lloyds TSB and HBOS.

Sally, MoneySuperMarket Expert

November 2008

In the aftermath of the crisis, shocking figures reveal that almost a quarter of a million Americans lost their jobs in October 2008 – just one month. The G20 world leaders subsequently meet for the first time since the start of the crisis.

April 2009

Several months later, the G20 agrees on a global stimulus package worth $5 trillion.

October 2009

A new government is elected in Greece and it is subsequently revealed that the financial problems in the nation were twice as large as previously thought.

May 2010

Signalling the start of the wider Eurozone crisis, Greece is bailed out for the first time after finance ministers agree on loans totalling €110 billion. This strengthens the austerity programme within the country and sends thousands of angry protestors to the streets.

November 2010

European ministers agree a financial bailout of Ireland worth €85bn.

May 2011

The European Central Bank bails out Portugal.

July 2011

Having failed to rectify things within the country, Greece is bailed out for a second time.

March 2012

The number of unemployed Europeans reaches its highest level ever.

Present

Without any doubt, the 2008 financial crash had a significant impact on the global economy as a whole and is only partially documented here. With awareness of the events that preceeded us, there is hope that we’ll avoid or be ready for the eventuality of another financial crash.

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