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Industrial Organization and Regional Development in Interwar Britain

Published online by Cambridge University Press:  03 March 2009

Carol E. Heim
Carol E. Heim
Affiliation:
Assistant Professor of Economics at the University of Massachusetts, Amherst, Massachusetts 01003.
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Abstract

Developments in industrial organization contributed to the lack of diversification in Britain's older industrial areas during the interwar period. The large-scale firm had not yet developed in appropriate industries to the point where large numbers of branch plants could be sent to the depressed areas (as they were after World War II), even if interwar macroeconomic policy had been more expansionary. At the industry level, barriers to new entrants and restrictive practices were high in the 1930s, precisely the period when the need for structural change in the depressed areas was most apparent.

Type
Articles
Information
The Journal of Economic History , Volume 43 , Issue 4 , December 1983 , pp. 931 - 952
Copyright
Copyright © The Economic History Association 1983

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References

The study is based in part on research conducted for her Ph.D. thesis, “Uneven Regional Development in Interwar Britain” (Yale University, 1982). Financial assistance for research in Britain from the Concilium on International and Area Studies and the Department of Economics, both of Yale University, is gratefully acknowledged. Permission to cite the Nufileld Trust Papers was granted by Deloitte Haskins & Sells. The author would like to thank Michael Bernstein, Leslie Hannah, John J. Oxley, William Parker, two anonymous referees, and the participants in the Harvard Workshop in Economic History and the Workshop on Domestic and International Economic Restructuring, University of Massachusetts, Amherst, for helpful comments on earlier drafts.

1 For the best contemporary expositions of this position, see Dennison, S. R., The Location of Industry and the Depressed Areas (London, 1939);Google ScholarPolitical and Economic Planning, Report on the Location of Industry (London, 1939); and Great Britain, Royal Commission on the Distribution of the Industrial Population,Google ScholarReport, Cmd. 6153 (London, 1940).Google ScholarFor a more recent discussion of these issues, see Lee, C. H., Regional Economic Growth in the United Kingdom since the 1880s (London, 1971), especially pp. 204–05.Google Scholar

2 This argument, however, is criticized by Leslie Hannah, who points out that the Grid had at best an indirect effect in making industry more footloose. Electric power in factories in the South and Midlands was more likely to be generated by coal imported to the region than to be transferred through the National Grid, and electricity for industry remained more expensive in the South than near the coalfields. Improvements in power-station design did result, however, in less coal being required per unit of power used, which allowed industry greater locational freedom. See Hannah, Leslie, Electricity before Nationalisation: A Study of the Development of the Electricity Supply Industry in Britain to 1948 (Baltimore, 1979), p. 211.CrossRefGoogle Scholar

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7 Great Britain, Department of Industry, Industrial Movement in the United Kingdom, 1966–75, by Pounce, R. J. (London, 1981), p. 30. “Peripheral areas” refers here to Northern Ireland and the Development Areas eligible for government assistance (northern and western industrial areas, plus Devon and Cornwall). The proportion of all interregional movement drawn to these areas was lower in 1972–1975 than it had been in the 1960s.Google Scholar

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12 On the importance of linkages for small to medium-sized firms, see Florence, P. Sargant,Investment, Location and Size of Plant: A Realistic Inquiry into the Structure of British and American Industries (Cambridge, 1948).Google ScholarSee also Stigler, George J., “The Division of Labor is Limited by the Extent of the Market,” Journal of Political Economy, 59 (06 1951), especially pp.192–93.CrossRefGoogle Scholar

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14 Luttrell, Factory Location, 1:342.Google Scholar

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17 Luttrell, Factory Location, 1: 232.Google Scholar

18 Ibid., 1: 159.

19 Prais, S. J., The Evolution of Giant Firms in Britain (Cambridge, 1976), pp. 64–65.Google Scholar

20 For general treatments of the development of the large-scale firm in Britain, see Hannah, Leslie, The Rise of the Corporate Economy: The British Experience (Baltimore, 1976);Google ScholarChannon, Derek F., The Strategy and Structure of British Enterprise (Boston, 1973); andCrossRefGoogle ScholarChandler, Alfred D., “The Growth of the Transnational Industrial Firm in the United States and the United Kingdom: A Comparative Analysis,” Economic History Review, 2d ser., 33 (08 1980). They do not all agree with Prais that the real change in the British corporate economy came in the 1950s and 1960s. The relatively slow emergence of the large-scale firm in Britain is clearly important to the arguments being advanced here.CrossRefGoogle Scholar

21 Massey, “In What Sense a Regional Problem?” pp. 237, 240.Google Scholar

22 Lindley, Sir Arnold, “Development and Organisation of the General Electric Company Ltd.,” in Business Growth, ed. Edwards, Ronald S. and Townsend, Harry (London, 1966), pp.333, 339.Google Scholar

23 Assistance could include share or loan capital; contributions from the Commissioners for the Special Areas towards rent, rates, or income taxes; or provision of factories. Capital was provided by the three special finance organizations. The Nuffield Trust was established by a gift of £2 million from Lord Nuffield (William Morris, of Moms Motors). The Special Areas Reconstruction Association, Ltd. was set up under the auspices of the Bank of England with a nominal capital of £1 million subscribed by the City, trust and finance companies, insurance companies, and large industrial undertakings, and with partial loan guarantees and administrative costs provided by the government. It lent primarily to small firms, in amounts under £10,000. The Treasury Fund was a £2 million government fund set up partly in response to criticism of the Special Areas Reconstruction Association. These organizations confined their activities to the Special Areas in West Cumberland, Durham and Tyneside, South Wales, and Scotland (mining, shipbuilding, and heavy industrial areas). The boundaries of the Special Areas excluded major cities in the regions (for example, Glasgow and Cardifi), with the exception of Newcastle.Google Scholar

24 The Board of Trade's 1938 Survey of Industrial Development included a table (pp. 5–6) indicating that there was a total of only 173 new factory openings and extensions in the Special Areas during 1932–1938. As noted above, these data only include businesses employing 25 or more persons. Many of the assisted firms were, at least initially, smaller, which would help to account for the number of assisted firms, during a shorter period of time, exceeding the total new factory openings and extensions. Also, not all the assisted firms were opening new factories or extending.Google Scholar

25 See Table V-9, pp. 419–20, in Heim, , “Uneven Regional Development in Interwar Britain” (Ph.D. diss., Yale University, 1982).Google ScholarA similar point is made by Roberts, R.O. in “Special Financial Facilities for Industry in the Depressed Areas with Particular Reference to the Experience of South Wales,” The Manchester School of Economic and Social Studies, 21 (01 1953), 59.CrossRefGoogle Scholar

26 Dunning, John H., American Investment in British Manufacturing Industry (London, 1958), p.86.Google Scholar

27 This evidence is consistent with Luttrell's suggestion that interwar branches tended to be of a different type than postwar branches, since the primary impetus to movement was space for expansion rather than labor. See Luttrell, Factory Location, 1: 41.Google Scholar

28 Nuffield Trust Papers, Nuffield Library, Oxford [henceforth, N.T.], Minute Books, Meeting of 2 May 1938.Google Scholar

29 N.T., Minute Books, Meeting of 5 April 1937 (Welsh Metal Industries);Google ScholarBarker, Theodore C., The Glassmakers: Pilkingron, The Rise of an International Company, 1826–1976 (London, 1977), pp. 369–70; andGoogle ScholarN.T., Minute Books, Meetings of 19 Feb. 1937 and 26 Feb. 1937 (Pilkington); N.T., Minute Books, Meeting of 27 July 1949 (Hancocks Shipbuilding Co. [Pembroke] and Treforest Chemical Co.).Google Scholar

30 Ryott, David, John Barran's of Leeds 1851–1951 (Leeds, 1951), pp. 12, 14; Leeds City Archives, Barrans Files, Correspondence with North East Branch, 1936–45; and Leeds City Archives, Montague Burton Archives, Files 9, 25, 36, 77, and 94.Google Scholar

31 Channon, Strategy and Structure of British Enterprise, pp. 25–32, 48, 236–37.Google Scholar

32 Howells, Dudley V., “Report on the Canning Industry in Scotland” in Light Industries in Scotland, ed. Scottish, Economic Committee ([Glasgow], 1938), p. 121.Google ScholarThe importance of distribution organizations and their relationship to the development of large-scale firms has been stressed by Chandler, Alfred D. in The Visible Hand: The Managerial Revolution in American Business (Cambridge, Massachusetts, 1977).Google Scholar

33 Howells, “Report on the Canning Industry”, pp. 119–20.Google Scholar

34 Ibid. p. 120.

35 Reader, W. J., Metal Box: A History (London, 1976), pp.72, 79.Google Scholar

36 Hannah, The Rise of the Corporate Economy, p. 175.Google Scholar

37 Ibid., pp. 175, 159–61.

38 Ibid., p. 159.

39 Ibid., p. 146.

40 Hay, John M., “Report on the Manufacture of Heating, Ventilating and Refrigerating Apparatus in Scotland”, in Light Industries in Scotland, ed. Scottish Economic Committee, pp.82–83.Google Scholar

41 Cowan, James A., “Report on the Manufacture of Electrical Appliances and Equipment in Scotland”, in Light Industries in Scotland, ed. Scottish Economic Committee, p. 213.Google Scholar

42 On the Scottish case, see Campbell, R. H., The Rise and Fall of Scottish Industry, 1707–1939 (Edinburgh, 1980);Google ScholarCheckland, Sidney, The Upas Tree: Glasgow 1875–1975 (Glasgow, 1976);andGoogle ScholarSlaven, Anthony, The Development of the West of Scotland: 1750–1960 (London, 1975). See also Heim, “Uneven Regional Development in Interwar Britain”.Google Scholar

43 Council of the City and County of Newcastle upon Tyne, Proceedings of the City and County of Newcastle Upon Tyne for 1937–1938 (Newcastle upon Tyne, 1938), Council Meeting of 20 04 1938, p. 668.Google Scholar

44 Glasgow University Archives 49.35/74/29, Lithgow Papers, “Glasgow Herald” (typescript), date pencilled “Jany 1933”, p. 6.Google Scholar

45 See Chandler, The Visible Hand. American and German firms that had gotten an early start in establishing such organizations, and their subsidiaries in Britain, dominated the British market in several of the “new” industries and presented a stiff challenge to potential British producers by the 1930s. See the discussion of the cash register and sewing machine cases below.Google Scholar

46 Smith, Douglas H., The Industries of Greater London (London, 1933), p. 105.Google Scholar

47 N.T., Mr B. Seebowm Rowntree, Miscellaneous Correspondence, 13 Jan. 1937 to 30 Aug. 1946, Hyde to Rowntree, 26 Jan. 1937.Google Scholar

48 Ibid.

49 Ibid., [unsigned, but probably Rowntree] to Hyde, 27 Jan. 1937. See also the case of Compact Chemicals (manufacturers of a proprietary boot polish) in N.T., Minute Books, Meetings of 5 Dec. 1938, 9 Jan. 1939, and 27 May 1940.

50 N.T., Minute Books, Meeting of 8 Nov. 1937.Google Scholar

51 Ibid., Meetings of 22 Nov. 1937 and 29 Nov. 1937.

52 Ibid., Meetings of 29 Nov 1937 and 19 Jan. 1938. A similar case was British Sewing Machines, which the Trust did fund. The Trustees were not satisfied with the company's arrangements for sales and service, although it did take onto its board a director of the Electrolux Co., a Swedish firm, to benefit from that firm's experience. See N.T., Box 17, British Sewing Machines Ltd., 29 Jan. 1937 to 2 Sept. 1941, Extracts from Nuffield Trust Minutes, Meetings of 29 Jan. 1937 and 14 March 1938, and Roney to Hutchinson, 28 Oct. 1939; and N.T., Minute Books, Meeting of 27 July 1949.

53 Hannah, The Rise of the Corporate Economy, p. 155.Google ScholarSee also Lucas, A. F., Industrial Reconstruction and the Control of Competition: The British Experiments (London, 1937).Google Scholar

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58 Monopolies and Restrictive Practices Commission, Collective Discrimination, p. 25.Google Scholar

59 N.T., Box 15, Miscellaneous Correspondence, Memorandum concerning manufacture of porcelain enamelled cast iron baths (sent to Mr. Lord) [apparently 1937]; see also N.T., Minute Books, Meeting of 12 Feb. 1937, where it is explained that the trade is closely controlled by a British as well as an international manufacturers' association.Google Scholar

60 Monopolies and Restrictive Practices Commission, Collective Discrimination, pp. 39–40, 49,75–76.Google Scholar

61 Britain, Great, Monopolies and Restrictive Practices Commission, Report on the Supply of Insulated Electric Wires and Cables (London, 1952), pp. 18, 26;Google Scholaridem., Report on the Supply of Electric Lamps (London, 1951), pp. 25–28, 33–36, 90–91; idem., Report on the Supply and Export of Matches and the Supply of Match-Making Machinery (London, 1953), pp. 21, 85.

62 Public Record office [henceforth, P.R.O.], T187/2, S.A.L.A.C., Notes for meeting on 25 May 1939.Google Scholar

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64 P.R.O. T187/2, S.A.L.A.C., Application from aberdare cables, Ltd., May 1939.Google Scholar

65 P.R.O. T187/2, S.A.L.A.C., Record of Meeting on 11 May 1939. See also N.T., Minute Books, meetings of 11 Aug. 1041 and 19 Nov. 1941.Google Scholar

66 See Allen, G. C., The Industrial Development of Birmingham and the Black Country, 1860–1927 (London, 1929);Google ScholarBeesley, Michael, “The Birth and Death of Industrial Establishments:Experience in the West Midlands Conurbation” The Journal of Industrial Economics, 4 (Oct. 1955), 45–61.CrossRefGoogle Scholar