For the City, the Great War began with a financial crisis. Even before Britain committed itself, Europe’s great powers ranging against one another spelled disaster: the collapse of the magnificent, peaceful edifice of international trade built between the empires.
As told in Jerry White’s riveting account of London in the war, Zeppelin Nights, on Friday 31 July 1914 the London Stock Exchange closed indefinitely. Lloyd’s of London refused all business except to insure war risks. The bank rate suddenly doubled from 4 per cent to 8 per cent – its highest level in 40 years. Long queues formed outside the Bank of England, eager to exchange notes for the harder currency of gold.
The drumbeats came faster and faster. Panic buying of supplies by householders began. On Saturday, stores started refusing to give out gold in change and the bank rate rose again, now to 10 per cent. On Sunday, by royal proclamation a one month moratorium on payment of bills of exchange was declared, slight relief for those in the business of international trade.