Fortunately, it seems like a big bank collapse has been avoided in the UK. However, it seems much of the crisis was created by the Bank of England. This article says: “Other bankers felt the same. ‘Northern Rock was avoidable,’ one executive said on Wednesday. ‘Had it been a French or German bank it would have been able to borrow from the ECB.’”
So not only are interest rates higher here than in the Eurozone, but the central bankers are also less competent.
The problems with Northern Rock made some (most conservative) journalists point out the parallels with Black Wednesday. It’s very interesting to see how many people in the UK learnt a different lesson from that day than what many in the rest of the EU did. Here, people seem to have concluded that currency cooperation was bad, and that if the ERM was bad, then the euro must be doubly so. On the continent, a widespread conclusion was that Black Wednesday was caused partly by the German Bundesbank setting interest rates in a very nationalistic way (because of the German reunification, Germany needed very different rates for a while) rather than looking at the needs of all the currencies in the ERM, partly by the fact that currencies could be pushed out of the ERM by traders; the logical consequence of this analysis was therefore to create a European currency with a European Central Bank.
Personally, I agree with the continental analysis, and I think it’s a great shame the UK didn’t join the euro from the beginning. But it’s not too late yet, and hopefully the last few days will help convince people that the euro will actually benefit them.