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There had been a steady decline in heavy industry in the UK as it faced increased competition from abroad. Following the upheaval of the Great War, many traditional markets for British heavy goods sourced cheaper supplies elsewhere.

This caused a fall in demand in the British mining and steel industries and weakened the British economy. The General Strike of 1926 actually made the decline faster, as the new markets became even more appealing.

Therefore, there is evidence to suggest that the crisis of 1929 simply made an already bad situation worse.

Competition from abroad/new markets

Britain’s traditional pre-World War One export markets, eg Canada, Australia and New Zealand, were instead buying:

• US steel
• German coal
• Indian cotton

Losing these crucial markets resulted in British jobs being lost.

Obsolete methods

Too many industries were using outdated practices when producing. British heavy industry, eg coal and steel, were both using outdated labour-intensive techniques. Other countries were using machinery more effectively.

In the mid-1920s, coal cost 65p per tonne to produce in the USA compared to £1.56 in Britain. Meanwhile the USA, Germany and Japan were able to undercut British steel prices using more efficient and modernised steel-making plants. This brought steelmaking to an end in Ebbw Vale in 1929, and part of the steelworks in Dowlais closed in 1930, resulting in 3,000 steelworkers becoming unemployed.

As demand decreased, older traditional industries declined and workers were laid off. However, these older traditional industries had already entered a period of decline after the First World War.

Import duties

British governments tried to encourage free trade between countries in the 1920s, but many others, especially the USA, used tariffs to protect their home-grown industries. Following the Wall Street Crash, import duties rose around the world and international trade declined sharply. Between 1929 and 1931, exports from Britain fell by half. The demand for ships to transport goods also fell dramatically, and this led to a further fall in demand for steel and coal.

Unemployment

There was a rapid growth in unemployment from 6 per cent of the population in 1929 to 15 per cent by 1932. This meant that over 3 million people no longer had a wage and could not buy consumer goods. This led to a further decrease in demand for British goods, causing more businesses to go bankrupt and creating greater unemployment.

Savings

Even those still in employment became more careful with spending and investing due to the economic uncertainty. This led to even more businesses struggling.