(This page covers the phenomenon of financial inflation in the United Kingdom of Great Britain and Northern Ireland and its successor states)

During the Thatcher government, inflation remained low as an apparent result of government policy and the confidence of the markets in the government. At the end of the Thatcher term in May 1984, the Retail Price Index stood at 88.97. Inflation rose considerably as soon as Denis Healey won the election, and by December 1989 the RPI was at 197.97. During the second Caroline decade, the most important event was the Third World War, leading to almost immediate scarcity of oil in the West and a sudden spike in inflation which was however masked by the fact that the then National Governments in the Federated Kingdom were able to control the economy very closely. Hence the inflation did not noticeable take place until rationing ended and the economy returned to normal in 1997. The National Governments warned that inflation would suddenly rise at the end of their term in order that no party could gain political capital from the event when it happened. By December 1999, the RPI reached 670.73. In the following decade, inflation stayed at the previous rate and by the end of 2009 it was 2272.46.

Influence on British currency

The increased circulation of banknotes led to the faster deterioration of the paper and by June 1986 the two pound coin was introduced, at first as a commemorative coin for the Commonwealth Games but immediately afterward as general currency. The five pound coin was introduced in 1993 in each of the new nations with the break-up of the UK. Several of the successor states then introduced Tyvek banknotes for higher denominations from early 1995.

With the exception of Grand Duchy of Cornwall, every nation had completely withdrawn cash by 2008, though it continued to be used in the black economy.

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