The 1987 storm before the stock market storm

The storm hit the UK on the night of October 15th 1987. Earlier on television, weather presenter Michael Fish had reassured viewers: “Earlier on today, apparently, a woman rang the BBC and said she'd heard there was a hurricane on the way. Well, if you're watching, don't worry, there isn’t."

I suppose that technically, hurricanes cannot reach this far North, but the UK certainly had hurricane force winds, the most violent since 1703. Winds reached 120 mph, causing major damage, with trees and power lines brought down. Britain lost an estimated 15 million trees, and hundreds of thousands of people were left without electricity, some for up to two weeks, as the National Grip suffered heavy damage.

Buildings were damaged in London, and falling trees smashed onto parked cars and blocked roads. I was woken up in the night, not only by the howling winds, but also by a huge crash of masonry onto the street just outside my window, which I discovered next morning was caused by chimney pots being blown off the roof of my building. Public transport in London and the Southeast was mostly out of action the next morning as trees were strewn across roads and railways, and people were advised not even to try to go into work.

It was described as “a violent extratropical cyclone,” as a major depression in the Bay of Biscay headed Northeast. It hit Britain, France and the Channel Isles, leaving 18 dead in Britain, and with damage estimated by the insurance industry to be upwards of £2 billion. As happens with most disasters, lessons were learned, and major improvements were put into effect to improve atmospheric observation, relevant computer models, and the training of forecasters. This may have included Michael Fish, who might otherwise have had a relatively undistinguished career, but was immortalized by that one major forecasting error.

There was a further consequence. Few City traders and dealers managed to make it into work on Friday 16th, and market trading was suspended twice, with the market closing early at 12.30 pm. This meant light trading, with the City unable to react adequately to the late dealings on Wall Street, where the Dow Jones Industrial Average recorded what was then its biggest-ever one-day fall, in a major market correction. After a weekend spent clearing up after the storm, UK City dealers came in on the Monday, Monday 19th, known as Black Monday, to a sea of red as markets collapsed. It was a reaction to the exuberance of the 80s boom and bull run. The bears had a field day as over-valued stocks plunged South, and screens remained red for weeks afterwards.

The events of the Great Storm and of Black Monday still bring shudders to those old enough to remember. Britain recovered from the physical damage and repaired it, and trees were planted to replace those lost. The markets recovered from the psychological damage, and stocks recovered from their losses within two years. Some of the crash was put down to automated trading, so new regulations were put in place to limit the degree to which this might happen in future.

It was a correction, and a major one, but they happen, and the markets resumed their steady upward climb until the next one. I still sometimes wear a bow tie a friend gave me, a pink one with black printing featuring a section of the Financial Times stock prices for October 19th 1987. Occasionally I wear it when I attend City functions and receptions to remind my friends in the finance sector that all men are mortal.