Little of the activity of the early merchant bankers was of any benefit to manufacturers who looked to the joint stock banks and to London private banks such as Glyn Mills. Chapman suggests that this was entirely understandable since the banks were not British and were geared to trade. An important investor, the ‘father of the investment trust’, the Scots Robert Fleming, had only six industrial issues out of sixty in the period 1900-3: the two American electrical companies (British Westinghouse and British Thomson Houston of which I wrote in HBSTMW) and Imperial Tobacco, Wemyss Collieries, Lever Bros, Portland Cement and Lancashire Power Construction. The suggestion is that this lack of interest in manufacturing contributed to the poor performance of British manufacturing in the latter part of the nineteenth century.
However, the early nineteenth century saw active stock exchanges in London but also in Glasgow, Edinburgh, Aberdeen, Manchester, Birmingham and Dublin. For London, trading was overwhelmingly in government securities both British and foreign. For the provincial exchanges there were canals, waterworks and docks and then increasingly railways and gasworks. There were specialist provincial exchanges, so Glasgow in coal and iron, Cardiff in shipping, Liverpool in insurance and Sheffield in engineering. Overall, government stock dominated and in the early days there was little overlap between London and the individual provinces.
A key issue was communication. As I describe in my chapter on communication in HBSTMW, the postal service offered a vital connection between London and provincial exchanges and brokers allowing prices to be set and deals to be done. The advent of telegraph added speed, although, as with all new technology, not necessarily reliability at least initially. Telegraph allowed communication between telegraph offices; in time dedicated lines were installed between exchanges although even then congestion could cause delays. Ticker tape followed allowing real time communication of prices. The final innovation before the mid twentieth century was of course the telephone initially used only within towns but slowly extending out across the country. It is worth observing that the broader linkage happened later in the Britain than in other countries because of the inaction of government and the resistance of vested interests. The huge advantage of improved communication was both consistent pricing and a bigger market for all concerned;
Vested interests came into play in the stock exchanges as provincial brokers found they could trade in London but bypassing the London Stock Exchange. London brokers with strong contacts into the provinces had become ‘shunters’ in effect providing a separate but related market. The London exchange, unlike those in the provinces, operated with jobbers on the trading floor. This system of single capacity was treasured and led to resistance to direct communication. In 1909, the vested interests won the day restricting the activities of the shunters.
The nineteenth century saw two particular periods of ‘stock exchange mania’ with the railways in the 1840s and the mines in the 1890s. It was the utilities which dominated, so the railways, coal mines and iron masters. In 1900, of a total of paid up capital of £7.6 billion traded on the London Stock Exchange, £3.7 billion were government stocks, £3.0 billion railways, £440k industrial and about the same in financial and services. After the end of the First World War the London Stock Exchange attracted larger industrial, commercial and mining companies.
In the late nineteenth century two notorious promoters of companies, Ernest Terah Hooley and Harry Lawson, made waves in the new motor industry and I wrote about these in HBSTMW.
Moving into the twentieth century, Sir Arthur Wheeler in Leicester gained a reputation as a promotor of ‘sound companies’. As is the way with so much of this story, nothing lasts for ever and in 1931 Sir Arthur, aged 70, went bankrupt. Of importance to British manufacturing he left two merchant banks which were not only firmly British but were firmly financiers of manufacturing: Charterhouse and Philip Hill (later Hill Samuel).
British Manufacturing History 