Old-style manufacturing, which critics complained was creating an industrial wasteland, was run down in the quest for a competitive new Britain. Unemployment rose above three million.
There was considerable unrest among the so called "wets" on the Conservative back benches and that, coupled with riots in some inner city areas, saw pressure on Margaret Thatcher to modify her policies.
But the prime minister refused to crumble. She told the 1980 party conference: "To those waiting with bated breath for that favourite media catch phrase, the U-turn, I have only one thing to say. You turn if you want to... the lady's not for turning."
Falklands WarBy late 1981 her approval rating had fallen to 25%, the lowest recorded for any prime minister until that time, but the economic corner had been turned.
Her popularity received its biggest boost in April 1982 with her decisive response to the Argentine invasion of the Falkland Islands.
The prime minister immediately dispatched a naval task force and the islands were retaken on 14 June when the Argentine forces surrendered.
Victory in the Falklands, together with disarray in the Labour Party, now led by Michael Foot, ensured a Conservative landslide in the 1983 election.
The following spring the National Union of Mineworkers called a nationwide strike, despite the failure of their firebrand president, Arthur Scargill, to ballot his members.
Margaret Thatcher was determined not to falter. Unlike the situation Edward Heath faced in 1973, the government had built up substantial stocks of coal at power stations in advance of the industrial action.
Third termThere were brutal clashes between pickets and police but the strike eventually collapsed the following March. Many mining communities never recovered from the dispute that hastened the decline of the coal industry.
In Northern Ireland, Mrs Thatcher faced down IRA hunger strikers, though her hard-line approach infuriated even moderate nationalist opinion and critics claimed it drove many young Catholics towards the path of violence.
She narrowly escaped death in an IRA attack on her Brighton hotel in 1984
Although she attempted to ease sectarian tensions, offering Dublin a role, peace efforts collapsed beneath the weight of Unionist opposition.
In October 1984, an IRA bomb exploded in the Conservative conference hotel in Brighton. Five people died and many others, including cabinet minister Norman Tebbit, were seriously injured.
Characteristically, the prime minister insisted on delivering a typically robust response in her keynote conference speech a few hours later.
"This attack has failed. All attempts to destroy democracy by terrorism will fail."
Her foreign policy was aimed at building up the profile of the UK abroad, something she believed had been allowed to decline under previous Labour administrations.
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