Author: Philip Eade
Jim Trott, who was chief dealer at the Bank of England in 1992 when Britain left the Exchange Rate Mechanism, has vivid memories of what came to be called Black Wednesday. "It was the sort of situation that if you'd known what was going to happen in advance, you'd have arranged to be on leave," he says. "But having gone through it, you wouldn't want to have missed out. It was an incredible position being between the government's objectives on the one hand and the markets on the other, with the government believing it could support the rate of Dm2.7780 to the pound."
The amount the British government spent trying to prop up the value of the pound has never been disclosed, although there have been plenty of estimates. Trott has signed the Officials Secrets Act and says the figure is something "I'll take with me to the grave".
In any event, he adds: "What happened afterwards in my view sowed the seeds for the success of the UK in the latter half of the decade. The devaluation of the pound to Dm2.17 turned out to be non-inflationary, which put us in a very competitive position for an export-led recovery.