Recovery and Crisis: 1945-1949
As the Second World War drew to a close in 1945 the London Stock Exchange was faced with one certainty amongst a sea of uncertainty. That certainty was that the controls and restrictions put in place since 1939 would not be rapidly dismantled. There was even the strong possibility that they would become a permanent feature of its peacetime operations. Faced with this certainty of government involvement in its activities the Stock Exchange had to devise a strategy that would allow it to both survive and prosper, under circumstances that were likely to be far removed from the conditions of the 1930s, and even more remote from those of before 1914, when it had been left, almost undisturbed, to manage its own affairs. If the strategy failed the result could be direct Treasury supervision over the securities market, bypassing the Stock Exchange completely, or even the nationalization of the institution itself, with its elected officials replaced by government appointments. Such was the fate that did befall the Bank of England in 1946, after the Labour Party won the 1945 election. Having experienced Treasury intervention in the securities market during the war, and protested about the resulting mismanagement and bias, this was not an outcome that the membership of the Stock Exchange wanted. Consequently, the decisions taken by the Stock Exchange in those post- war years were heavily conditioned by the need to maintain the goodwill of the government.
Consequently, though the ending of the war brought immediate calls from among the members to return to a peacetime mode of operation, the steps taken were slow and halting. Each move had to be negotiated with the government, either the Treasury or later the Bank of England, with due regard being paid to hostile public opinion. The London Stock Exchange had neither complete control over the securities market nor was it master of its own affairs, and so had to proceed cautiously if it was to retain what authority it still possessed. It was also not at all clear what the role of the London securities market was to be. The wholesale disposal of a large proportion of Britain's holdings of foreign securities, combined with the great increase in the wealth of the American investor, had placed New York at the centre of what remained of the international