Rates of return, concentration levels and strategic change in the British railway industry, 1830-1912

Journal of Transport History

Volumn 26, Issue 1, 2005, Pages 41-60

  Arnold, A J ^a   McCartney, S ^b  

^a UNIVERSITY OF EXETER BUSINESS SCHOOL   (United Kingdom)

^b UNIVERSITY OF ESSEX   (United Kingdom)

Author keywords

Amalgamation; British railways; Industrial concentration; Rates of return; Strategic change

Indexed keywords

INDUSTRIAL HISTORY; RAILWAY TRANSPORT; STRATEGIC APPROACH;

EURASIA; EUROPE; UNITED KINGDOM; WESTERN EUROPE;

EID: 33749072820     PISSN: 00225266     EISSN: None     Source Type: Journal    
DOI: 10.7227/TJTH.26.1.3     Document Type: Article

References (84)

1. T. R. Gourvish, Railways and the British Economy, 1830-1914 (London, 1980), p. 10.
2. J. Simmons and G. Biddle, Oxford Companion to British Railway History (Oxford, 1997), p. 13.
3. Although central government had generally tried to avoid funding the pre-railway transport infrastructure, at a local level different combinations of 'public-private' finance combinations had already been used to fund parts of the road, port and dock systems; see P. S. Bagwell, The Transport Revolution (London, 1988)
4. and M. J. Freeman and D. H. Aldcroft (eds), Transport in Victorian Britain (Manchester, 1988).
5. P. J. Cain, 'Railway combination and government, 1900-1914', Economic History Review 25 (1972), p. 623.
6. Gourvish, Railways, p. 10.6
7. Simmons and Biddle, Oxford Companion, p. 197;
8. J. Foreman-Peck, 'Natural monopoly and railway policy in the nineteenth century', Oxford Economic Papers 39 (1987), p. 701;
9. P. Bagwell and P. Lyth, Transport in Britain: from Canal Lock to Gridlock (London, 2002), p. 65;
10. D. H. Aldcroft, British Railways in Transition (London, 1968), p. 8;
11. W. E. Simnett, Railway Amalgamation in Great Britain (London, 1923), pp. 5, 14;
12. Gourvish, Railways, p. 10.
13. G. Channon, Railways in Britain and the United States, 1830-1940 (Aldershot, 2001), pp. 27-8.
14. T. R. Gourvish, 'Railway enterprise', in R. A. Church (ed.), The Dynamics of Victorian Business: Problems and Perspectives to the 1870s (London, 1980), p. 129.
15. J. Simmons, The Railway in England and Wales I, The System and its Working (Leicester, 1978), p. 35,
16. calculates an average dividend of 5.75 per cent in 1842, based on thirty-six companies, 'including all those of any importance'. M. C. Reed, Investment in Railways in Britain, 1820-1844 (Oxford, 1975), p. 62,
17. states that 'of twenty-five major English companies paying a dividend by the end of 1843, thirteen with a total paid-up capital of £18.3 million were paying 4 per cent or more, seven of which were paying 5 per cent or more'. W. W. Tomlinson, Tomlinson's North Eastern Railway: its Rise and Development (Newton Abbot, 1987), pp. 358-9, from dividends paid in the first half of 1841 by the seventeen companies then working which were later incorporated into the North Eastern Railway, demonstrates an overall annual return of 3.75 per cent.
18. R. J. Irving, 'The profitability and performance of British railways, 1870-1914', Economic History Review 31 (1978), pp. 46, 59;
19. Cain, 'Railway combination', p. 628;
20. P. J. Cain, 'Railways 1870-1914: the maturity of the private system' in Freeman and Aldcroft, Transport in Victorian Britain, pp. 95, 109;
21. Gourvish, Railways, p. 45.
22. At first, social returns were thought to be maximised by a system in which 'numerous small companies acted autonomously, subject only to the imperatives of a competitive market and public opinion', a concept which paid little attention to the possible cost savings from larger-scale operations. Channon, Railways in Britain, pp. 32-3. The underlying contradiction was not resolved until the railways were nationalised in January 1948 (which brought its own additional problems), apart from the periods of temporary State control during the two world wars. It also reappeared in a somewhat different form in April 1994 with the re-creation of private-sector railway companies (although without their own control over the track network).
23. G. Hawke and J. Higgins, 'Britain' in P. O'Brien (ed.), Railways and the Development of Western Europe, 1830-1914 (Oxford, 1983), p. 170.
24. Bagwell and Lyth, Transport in Britain, p. 59.
25. See also J. Foreman-Peck and R. Millward, Public and Private Ownership in British Industry, 1820-1990 (Oxford, 1994), p. 11;
26. J. B. Baskin and P. J. Miranti, A History of Corporate Finance (Cambridge, 1997), p. 133.
27. See 'Railway competition and pooling in Britain before 1900' in Channon, Railways in Britain, pp. 110-27.
28. Report of the Railway Department of the Board of Trade on proposed Amalgamations of Railways (P.P. 1845, XXXIX), p. 155.
29. Indeed, within months the new combined entity amalgamated with the London & Birmingham and the Manchester & Birmingham to form the London & North Western, from then on the largest UK railway company.
30. Reports of the Select Committee on Railway and Canal Bills ('Cardwell committee'), Fifth Report (P.P., 1852-53, XXXVIII), p. 467.
31. Gourvish, Railways, pp. 50-2.
32. Irving, 'The profitability', p. 54.
33. Foreman-Peck and Millward, Public and Private, pp. 4-5, identify the 1820s to the 1860s as an era of competition in the railway industry and the 1860s to 1914 as one of closer regulation by Parliament (1994, pp. 4-5), although Irving, 'The profitability', seems to see the turning point as coming a little later.
34. Report of the Joint Select Committee of the House of Lords and the House of Commons on Railway Companies Amalgamation (P.P., 1872, XII), pp. 18, 27, 49.
35. Gourvish, 'Railway enterprise', p. 51;
36. D. H. Aldcroft, 'The efficiency and enterprise of British railways, 1870-1914', Explorations in Entrepreneurial History 5 (1968), p. 162;
37. Irving, 'The profitability", p. 58.
38. P. J. Cain, 'Railways versus traders: the genesis of the Railway and Canal Traffic Act of 1894', Journal of Transport History, new series, 2 (1973), p. 67.
39. Channon, Railways in Britain, pp. 33;
40. see also G. Alderman, The Railway Interest (Leicester, 1973).
41. Cain, 'Railway combination', p. 636;
42. M. Chick, 'Nationalisation, privatisation and regulation", in M. W. Kirby and M. B. Rose (eds), Business Enterprise in Modern Britain from the Eighteenth to the Twentieth Century (London, 1994), p. 320.
43. Report of the Departmental Committee on Railway Agreements and Amalgamations (P.P., 1911, XXIX), pp. 7, 18, 20-1.
44. Foreman-Peck and Millward, Public and Private, pp. 4-5.
45. See Aldcroft, 'Efficiency and enterprise', pp. 167-8.
46. The London & North Eastern (LNER), the London Midland & Scottish (LMS), the Southern (SR) and the Great Western (GWR) formally came into existence on 1 January 1923. Aldcroft, British Railways, pp. 77-8;
47. G. W. Crompton, 'Efficient and economical working? The performance of the railway companies, 1923-1933', Business History 27 (1985), p. 224;
48. G. W. Crompton and R. Jupe, '"An awkward fence to cross": railway capitalization in Britain in the inter-war years', Accounting, Business and Financial History 12, 3 (1992), p. 449.
49. L. Hannah and J. A. Kay, Concentration in Modern Industry (London, 1977), p. 42.
50. Hannah and Kay, Concentration, p. 47.
51. Bagwell, Transport Revolution, p. 168;
52. see also P. Bagwell, The Railway Clearing House in the British Economy, 1842-1922 (London, 1968), especially pp. 250-62.
53. J. Sutton, Technology and Market Structure: Theory and History (Cambridge MA, 1998), p. 94;
54. G. Symeonidis, The Effects of Competition (Cambridge MA, 2002), pp. 106-7;
55. Hannah and Kay, Concentration, pp. 48-50.
56. Simnett, Railway Amalgamation, p. 5.
57. See also Channon, Railways in Britain, pp. 22-32.
58. The data collected by the Board of Trade in 1914 were far more limited than in previous years. 35 Excluding the Irish companies.
59. Gourvish, Railways, p. 10.
60. See also the data on the share of total gross traffic receipts of the four and twelve largest companies in every tenth year in the period 1850-1920, in Channon, Railways in Britain, p. 27.
61. Simmons and Biddle, Oxford Companion, p. 399.
62. Companies that leased all their lines and were no longer operating them were excluded from the sample set, as were the smallest companies, i.e. those having authorised capital of less than £50,000. 40 The series are in B. R. Mitchell, British Historical Statistics (Cambridge, 1988), pp. 543-4 (capital) and pp. 545-8 (operating statistics).
63. The former ends in 1913, and there are lacunae in both series in 1868, when a significant number of companies failed to make a return, and in 1914-18. Receipts for 1843-48 in Mitchell are actually for years to 30 June, rather than calendar years. Accounting practices in the railways were not well standardised before 1868, when new legislation imposed far higher reporting standards on the railways than on companies in general, although the data from 1854 onwards have also been subject to the (relatively knowledgeable) standardising processes of the Board of Trade. The emphasis of the article on the position after 1870 and on the comparison of capital inputs with the residual net profit figures, which are not greatly affected by inconsistencies in the classification of expenses, reduces the impact of accounting problems prior to 1854. Although there are some figures for capital from 1913 to 1922 in B. R. Mitchell and P. Deane, Abstract of British Historical Statistics (Cambridge, 1962), pp. 225-7, they cannot be disaggregated. Further, only the overall returns of the results of working were produced for 1914-18, because the railways were under State administration. In 1919-20 the Board of Trade returns provide data for turnover and expenses only for the industry as a whole.
64. Cain, 'Railway combination", p. 629.
65. T. R. Gourvish, Mark Huish and the London & North Western Railway: a Study in Management (Leicester, 1972), p. 267;
66. T. R. Gourvish, 'A British business elite: the chief executive managers of the railway industry, 1850-1922', Business History 47 (1973), p. 290;
67. Gourvish, Railways, p. 10;
68. Gourvish, 'Railway enterprise', p. 134.
69. Costs rose particularly in the ten years from 1895; P. J. Cain, 'Railway combination', pp. 627-8.
70. Cain, 'Railways 1870-1914', p. 104.
71. See the account and discussion of mergers that were approved and rejected in the period 1900-14 in Cain, 'Railway combination', pp. 623-41.
72. Cain, 'Railways 1870-1914', p. 113.
73. After adjustment for price changes; Gourvish, 'British business', pp 306-8.
74. Gourvish, 'British business', pp. 308, 315.
75. See T. L. Alborn, Conceiving Companies: Joint-Stock Politics in Victorian England (London, 1998), especially pp. 1-2.
76. Cain, 'Railways 1870-1914', p. 113.
77. Cain, 'Railway combination', p. 624.
78. J. Langton and R. J. Morris (eds), Atlas of Industrialising Britain (London, 1986), p. 89, give comparative maps of the networks in 1872 and 1900.
79. See Aldcroft, British Railways, pp. 1-26;
80. Aldcroft, 'Efficiency and enterprise'; Irving, 'The profitability', p. 59.
81. See Cain, 'Railway combination', pp. 635-37.
82. Gourvish, Railways, p. 41.
83. Irving, 'The profitability', pp. 59, 64.
84. Foreman-Peck and Millward, Public and Private, p. 21.