. Post war economic recovery proved difficult. Britain, which was the world’s leading economy in the pre-war period, in particular, faced a prolonged crisis. . While Britain was pre occupied with war, industries had developed in India and Japan. . After the war, Britain found it difficult to recapture its earlier position of dominance in the Indian market, and to compete with Japan internationally. . To finance war expenditures, Britain had borrowed liberally from the US. . This meant that at the end of the war Britain was burdened with huge external debts.