As the first factory-based industry and one of the principal drivers of the industrial revolution, the textile industry has a special place in British economic history. The extraordinary growth of the cotton textile sector, in particular, was a triumph for the mill owners and merchants of Lancashire. In the 1880s more than 80 per cent of world cotton-cloth exports came from Britain. The subsequent decline of this part of the industry, beginning in the inter-war period and accelerating after 1945, was to a large extent the inevitable result of the spread of industrialisation. The production of cotton textiles, with its relatively simple technology, low capital requirements and easily transportable raw material, was a natural starting-point for developing countries as they began to build up their industries. Many of them moved on from cotton to make a wider range of textiles and clothing, and their low labour costs gave them a competitive advantage in overseas markets. From the 1950s onwards, despite the protective barriers which were raised against them, manufacturers in the developing countries steadily increased their share of world textile production and exports, and the shift is continuing.
Low-cost imports posed particular problems for the British textile industry, especially the cotton textile sector, because of its exceptional size at the start of the post-war period. The response was to restructure the industry through mergers and take-overs. This turned out to be a mistake. Many of the mergers which took place in the 1960s were unwound in the 1980s and 1990s. By contrast, the two most successful European textile industries, those of Italy and Germany, relied mainly on small and medium-sized firms, targeting sectors of the market which were less vulnerable to competition from imports. They also benefited to a far greater extent than the British industry from the expansion of intra-European trade in the 1950s and 1960s. This is a case where the long-standing British bias towards non-European export markets proved to be a serious disadvantage.
1750–1914: Lancashire’s Triumph
Before the industrial revolution the production of wool textiles was Britain’s largest manufacturing industry, and cotton was an expensive luxury. But cotton was a more versatile material – washable, easily dyed and printed, comfortable to wear in hot weather – and a huge market was waiting to be tapped if the price could be brought within reach of the mass of the population. This became possible in the second half of the eighteenth century when hand spinning and later weaving were replaced by machines. The invention of the spinning mule and the powerloom led to a shift of production from the home to the factory, and a sharp fall in manufacturing costs.1 As prices came down, domestic demand expanded rapidly, but from the early decades of the nineteenth century the main impetus to the growth of the industry came from exports. In 1850 more than 80 per cent of Britain’s cotton textile production was shipped overseas, representing nearly half the country’s total exports. Wool textile manufacturers also adopted the factory system during this period, but their growth was less spectacular, mainly because export opportunities, largely confined to countries with a warm climate, were more limited.
Two distinctive features of the cotton textile industry were its geographical concentration and its fragmented structure. Lancashire had been an important centre of linen production since the seventeenth century, and the pre-industrial putting-out system, whereby spinning and weaving were carried out in the worker’s home, had created a pool of skill and experience on which factory owners could draw. There was also an array of middlemen who bought the raw materials, co-ordinated the various stages of the production process and handled the marketing of the finished cloth.2 Lancashire had other advantages – a damp climate, easy access through the port of Liverpool to supplies of raw cotton (mainly from the US), and nearby reserves of cheap coal. Once the momentum of growth had been established, new entrants gravitated to the area where suppliers and sub-contractors were already in place. For example, Hibbert & Platt, which as Platt Brothers was to become the world’s largest textile machinery manufacturer, was founded in Oldham in 1822, and its presence helped to make that town a leading cotton spinning centre.3
Establishing a spinning mill or a weaving shed needed only a modest amount of capital, and from the start the industry was made up of small enterprises. Although combined spinning and weaving firms were not uncommon in the early years, the trend as the industry grew in size was towards specialisation by function, and each firm, whether engaged in spinning, weaving or finishing, generally concentrated on a narrow range of products. Administrative costs were kept low by delegating to middlemen much of the responsibility for buying and selling. A central role was that of the merchant-converter, who, having secured an order, bought grey cloth from the weaving mill and arranged for it to be bleached, printed or dyed. Foreign trade was in the hands of export merchants, many of whom – like Nathan Mayer Rothschild, who moved from Frankfurt to Manchester in 1799 – came from overseas. Manufacturers rarely had direct contact with the final customer for their products. This dense network of inter-connected businesses generated what economists have called external economies of scale. Firms did not need to ‘internalise’ functions which could be handled more efficiently by other members of the network.
The management of production within the mill depended on a compromise, sometimes an uneasy one, between employers and their most experienced workers. Before the advent of the factory the spinner or weaver, working from home, was given a contract for a piece of work, and he was expected to hire other workers, usually including members of his family, to get the job done. The factory owners adopted a modified version of this arrangement – internal contracting – whereby the senior spinner or weaver hired and supervised other workers in return for a fixed payment based on output.4 These senior workers organised themselves into trade unions, seeking to negotiate a fair price for each piece to be produced, and to prevent employers from cutting wages when trade was depressed. Despite initial resistance, employers gradually came to terms with trade unions, and by the end of the nineteenth century the cotton industry unions were among the strongest in the country.5
Thanks to its early technical lead and efficient organisation, the Lancashire industry established a competitive advantage which was not seriously challenged before the First World War. Germany was the second largest exporter of cotton textiles, but in 1913 its share of world exports, measured by value, was only 10 per cent, compared with Britain’s 55 per cent.6 The US was not a significant exporter, even though its industry was in some respects more technically advanced than its British counterpart. The scarcity of skilled labour in the US encouraged entrepreneurs to develop new machines – the ring spindle and the automatic loom – which could be operated by inexperienced workers. There were also differences in the structure of the industry. To produce long runs of standard cloth, which was what the US market wanted, the automatic loom had to be fed with yarn of consistent quality, and spinning and weaving operations had to be closely linked. Large, integrated mills were built to accommodate spinning and weaving under the same roof. American employers also dispensed with the system of internal contracting, so that the organisation of work was in the hands of managers rather than workers; trade unions were never as strong in the US cotton textile industry as in Lancashire.
The markets which Lancashire served were too varied to permit high-volume, standardised production on the US model, and, since skilled workers were in ample supply, only a few firms installed ring spindles and automatic looms. There were some large textile amalgamations in Britain around the turn of the century, principally in the finishing trades and in fine spinning; among the largest companies formed at that time were Calico Printers Association, Bleachers Association and Fine Spinners and Doublers Association. But these were horizontal mergers of competing firms, and they were designed more to reduce price competition than to achieve economies of scale. The same was true of English Sewing Cotton, a group of Lancashire sewing-thread manufacturers who came together in 1897 to counter the aggressive tactics of the dominant Scottish thread producer, J and P Coats. The bulk of the industry consisted of small, specialised firms.
If Lancashire was no longer at the forefront in technology at the end of the century, the old machinery still had plenty of life left in it, and there is no sign that entrepreneurial dynamism was fading. The mule and the Lancashire loom, in the hands of experienced workers, provided