When Britain emerged victorious from the Second World War, the Labour Party under Clement Attlee came to power and created a comprehensive welfare state, with the establishment of the National Health Service giving free healthcare to all British citizens, and other reforms to benefits. The Bank of England, railways, heavy industry, and coal mining were all nationalised. The most controversial issue was nationalisation of steel, which was profitable, unlike the others. Economic recovery was slow, housing was in short supply, and bread was rationed along with many necessities in short supply. It was an "age of austerity". American loans and Marshall Plan grants kept the economy afloat. India, Pakistan, Burma, and Ceylon gained independence. Britain was a strong anti-Soviet factor in the Cold War and helped found NATO in 1949. Many historians describe this era as the "post-war consensus", emphasising how both the Labour and Conservative Parties until the 1970s tolerated or encouraged nationalisation, strong trade unions, heavy regulation, high taxes, and a generous welfare state.

The post-war consensus, sometimes called the post-war compromise, was the economic order and social model of which the major political parties in post-war Britain shared a consensus supporting view, from the end of World War II in 1945 to the late-1970s. It ended during the governance of Conservative Party leader Margaret Thatcher. The consensus tolerated or encouraged nationalisation, strong trade unions, heavy regulation, high taxes, and an extensive welfare state.