5 - Industry Growth and Financial Networks

Summary

Earlier chapters have documented how the cotton textile industry in Britain emerged from regional financial and trading networks. From the onset of manufacturing, until the beginning of the nineteenth century, fixed capital requirements were small and working-capital requirements were easily satisfied by established local and regional credit markets. Automation was limited to specific processes in the value chain leading to spurts in growth, profit and capital accumulation for the partners of innovative firms. National markets, meanwhile, did not stand still and had the potential at least to supply capital to Lancashire firms on an extended scale, particularly after limited liability became widespread. As the previous chapter has shown, local middle- and working-class savings provided much of the capital that was needed. Lancashire textiles it seemed, notwithstanding continued economic growth, had little use for limited liability banking or indeed any financial institutions that did not evolve to service the specific needs of the cotton industry. The raw cotton market in Liverpool and the markets for yarn and cotton cloth in Manchester were the most important. How sustainable were these separate growth trajectories of industrial and financial institutions, and what were the implications for long-run economic performance? In general terms, how did the growth of the Lancashire textile economy fit with the rest of the British economy as it expanded in parallel? The chapter explores these questions.

As the cotton industry grew, the capital requirements of individual businesses also increased, creating options for entrepreneurs in terms of accessing finance. Second-generation mills with their larger capital bases were increasingly reliant on alternative networks to secure funding. For Lancashire-based networks, Manchester emerged as the most important centre for accessing merchant, and later finance, capital through regional stock exchanges. Although a more substantial financial centre, London seemingly had little to offer in terms of financial resources for further expansion in subsequent waves of industrial development. As the nineteenth century progressed, Lancashire and London remained on separate trajectories of development. There has been much debate as to the degree of separation, but most acknowledge there was some distance. Manufacturers more generally were excluded from the expansion of the Empire in favour of the interests of the City of London.