Britain's Trade and Finance after WWII
             The war, which broke out in September 1939, like the First World War, raised a host of supply problems, which could not be resolved satisfactorily by market forces alone. Once more, Govnerment had to take steps to control the economy and limits had to be placed on personal liberty. From May 1940 the country was governed by coalition of Conservatives, Labour and Liberals under Churchill, and Labour ministers played a prominent part. Since many controls were continued after the war ended in 1945, the war and immediate postwar years can be seen as a single period from the point of view of economic policy.
             The United Kingdom defaulted on its war debts to the United States in the post-1931 crisis, and Congress had passed the Johnson Act in 1934, which forbade new loans to government in default. As a result, Britain's gold and dollar reserves were at first controlled carefully in the hope of making them last for the three-year war which Anglo-French war planners envisaged.
             Whichever party had won the 1945 election would have faced tremendous external constrains on its policies. Britain's overseas liabilities (excluding Lend-Lease) had increased from $542 million in June 1939 to $3354 million in June 1945, while its reserves of gold and US and Canadian dollars had risen by only $121 million to $624 million between August 1939 and June 1945. Moreover, further borrowing would be necessary to finance essential imports since Lend-Lease ended with the war. The diversion of industry to war production meant that in 1945 exports were only 46 % of the 1938 volume. Moreover the sale of overseas assets had reduced income from abroad from $168 million in 1938 to $50 million in 1945, during which period prices had approximately doubled. (Sayers 1956, p.p. 491-7)
             Like much of the rest of the world, Britain was critically short of dollars with which to pay for essential purchases in North America. ...