What would happen if the UK went bankrupt?
What would happen if the UK went bankrupt?
Imagine you wake up one morning to find that Britain has declared bankruptcy. The pound has been dropped as a currency and the country is no longer able to pay its debts. The financial system is in meltdown and there are no laws to stop the banks from collapsing.
"Britain's public finances were in dire straits, the government admitted yesterday – but it said there was no need for panic."
After the bankruptcy
The first thing to happen would be a run on the banks. People would rush to withdraw their savings and as this happened, banks would start to go bankrupt. Rather than pay out their customers' money, they'd be more likely to close their doors or freeze people's accounts. This would mean that people wouldn't be able to get at their life savings. They wouldn't be able to buy food or petrol and so queues at supermarkets and petrol stations would start to build up. Because supermarkets are reliant on suppliers who deliver using trucks, shortages of fuel might mean that food warehouses couldn't be restocked.
Donald Rumsfeld
Donald Rumsfeld, who was secretary of defense under President George W Bush when the US experienced similar bank failures in 2008, predicted this scenario.
It’s not likely going to happen
While it's not likely going to happen, the UK could technically go bankrupt. If the UK went bankrupt, the UK would have to present its debt in the form of IOUs to China, Russia, and other countries. The government would then be responsible for repaying these debts over a long period of time.
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