British Cotton Textiles: Maturity and Decline

David Higgins, Steven Toms

• Publisher: Routledge
• Year: 2018
• Print ISBN: 9781138223882
• eBook ISBN: 9781315403649
• Edition: 1
• Topic: Business
• Subtopic: Business General
• Index: Business

This book examines the decline of the cotton textiles industry, which defined Britain as an industrial nation, from its peak in the late nineteenth century to the state of the industry at the end of the twentieth century. Focusing on the owners and managers of cotton businesses, the authors examine how they mobilised financial resources; their attitudes to industry structure and technology; and their responses to the challenges posed by global markets.

The origins of the problems which forced the industry into decline are not found in any apparent loss of competitiveness during the long nineteenth century but rather in the disastrous reflotation after the First World War. As a consequence of these speculations, rationalisation and restructuring became more difficult at the time when they were most needed, and government intervention led to a series of partial solutions to what became a process of protracted decline.

In the post-1945 period, the authors show how government policy encouraged capital withdrawal rather than encouraging the investment needed for restructuring. The examples of corporate success since the Second World War – such as David Alliance and his Viyella Group – exploited government policy, access to capital markets, and closer relationships with retailers, but were ultimately unable to respond effectively to international competition and the challenges of globalisation. The chapters in this book were originally published in Business History and Accounting, Business and Financial History.

Windows of Opportunity in the Textile Industry: The Business Strategies of Lancashire Entrepreneurs, 1880–1914

Steven Toms

University of Nottingham

The decades immediately preceding the First World War offered important opportunities to businesses in Britain’s vanguard export industry. The challenges of the second industrial revolution and the rise of overseas competition were, according to Chandler, during this ‘window of opportunity’, to fashion the new large corporate organisation and its associated managerial hierarchy.¹ Economic historians have given much attention to the failure of Lancashire entrepreneurs to follow the prescribed route of the ‘strategy structure’ school of thought. This has been attributed to the dominance of ‘personal capitalism’ and the inhibiting effect of individual control of businesses on investment and growth.² Also a significant amount of attention has been given to ‘institutional constraints’ on entrepreneurial behaviour,³ although this has been achieved without giving too much attention to many important institutions of Lancashire capitalism.

There are several reasons to suppose that the recent historiography of the industry has created a misplaced agenda that has stood in the way of deeper understanding. As argued below, the most important of these is the neglect hitherto of the process of capital accumulation, particularly regarding the emergence of family and local commercial elites. Economic and financial performance measures at the level of the individual business, as relative success indicators, and as signals influencing entrepreneurial strategies, have also been largely neglected. Furthermore, in a highly fragmented industry, linkages between firms are important and critics of Lancashire industrialists have examined only one of these, namely the relationship between the spinning and weaving branches. Far less has been said about linkages between producers and markets, especially the roles of intermediaries in Liverpool and Manchester. Less still has been said about the role of culture; the belief systems and common values which underpinned the development of businesses and institutions. Individual business strategies and the motivations of families, cliques and federations have also been absent from both sides of the ‘institutional constraints’ debate, which have concerned themselves only narrowly with entrepreneurial rationality and entrepreneurial failure. Ironically, these rival schools of thought have ignored entrepreneurs as individuals and historical actors. Although there are some important exceptions, which have a bearing on the data presented below,⁴ for an industry supposedly weakened by ‘excessive individualism’, the absence of evidence dealing with examples of individual behaviour is surprising. Consequently, Lancashire cotton, even more so than general British business history, has witnessed a neglect of entrepreneurial history. It is only in the context of a broader investigation of the institutions within which entrepreneurs had to operate that a genuine understanding of Lancashire capitalism can be obtained.

In presenting the collective business histories of 20 Lancashire companies, the objective of this article is to address the above omissions. The principal findings of an empirical survey based on archive and other contemporary sources are reported. Two comparative measures are used as benchmarks for the entrepreneurial strategies pursued by the sample companies. These are financial performance (return on capital employed) and capital accumulation (increase in capital employed).⁵ It is acknowledged that both measures rely heavily on accounting data and that there are possible resulting distortions, especially in shorter sub-periods. Nonetheless, the investigation is concerned with actual signals transmitted to investors through markets, and not with reified accounting accuracy. Whereas much has been written about the reliability of accounts in the late nineteenth century, it is beyond the scope of the current article to enter these discussions.⁶ Instead, in concentrating on the business histories of these companies, accounting data is assessed by reference to its fit with other sources.

The structure of the sample allows variations in behaviour and performance to be made between firms with differing governance structures. Thus larger firms that sought capital on a national basis are contrasted with the smaller publicly owned limited liability firms of the Oldham district, which in turn are compared with family firms.

To examine such contrasts, it is useful to construct a theoretical framework within which entrepreneurial behaviour can be formally analysed. Where industry concentration and large corporate hierarchies are avoided, it might be expected instead that entrepreneurs would place more reliance on trust and informal networks as a response to local conditions and with a view to minimising uncertainty in the business environment,⁷ a phenomenon particularly likely where family connections are important.⁸ Trusting behaviour of this sort, in a conventional economic framework, could be viewed as a more effective method of reducing transaction costs, and so improving resource allocation, than the alternative investment in formal organisational hierarchies, especially where monitoring costs are high.⁹ It also constitutes a business environment likely to work to the advantage of well connected family groups.¹⁰ Transaction cost economics, however, provides only a limited framework for analysis, given its a historical and static equilibrium tendencies.¹¹ In applying these models it is important to consider also the impact of shifts in wealth and power. This allows the examination of a further hypothesis; that private, family controlled companies tend to be more orientated towards the short term and adopt policies of higher dividend pay-outs, thereby damaging the long run economic performance of the economy.¹² For this reason the process of capital accumulation is placed at the centre of the analysis.

To achieve this, an examination of the relationship between the entrepreneur and capital market is presented with reference to the profit signals communicated by the market and to consequent investment and divestment behaviour of individual enterprises and contrasting ...

Table of contents

• Cover
• Half Title
• Title Page
• Copyright Page
• Table of Contents
• Citation Information
• Introduction – Lancashire cotton: A brief historical overview
• 1 Windows of Opportunity in the Textile Industry: The Business Strategies of Lancashire Entrepreneurs, 1880–1914
• 2 Producer co-operatives and economic efficiency: Evidence from the nineteenth-century cotton textile industry
• 3 Financial constraints on economic growth: profits, capital accumulation and the development of the Lancashire cotton-spinning industry, 1885–1914
• 4 Firm structure and financial performance: the Lancashire textile industry, c.1884–c.1960
• 5 Financial distress, corporate borrowing, and industrial decline: the Lancashire cotton spinning industry, 1918–38
• 6 Ownership, financial strategy and performance: the Lancashire cotton textile industry, 1918–1938
• 7 Public Subsidy and Private Divestment: The Lancashire Cotton Textile Industry, c.1950–c.1965
• 8 Financial Institutions and Corporate Strategy: David Alliance and the Transformation of British Textiles, c.1950–c.1990
• Epilogue: Survival strategies in textiles
• Index