From Empire to Europe: The Decline and Revival of British Industry Since the Second World War. Geoffrey Owen

did not provide a long-term future for Courtaulds and that there were limits, because of competition from ICI, Du Pont and others, to what the company could do as a fibre producer. The alternative was to move further into textiles, both as a captive outlet for fibres and as a growth business in its own right.³² Kearton and his colleagues convinced themselves that the decline of the Lancashire cotton industry could be halted by an injection of capital, technology and modern management, and that, once modernisation was complete, it would be able to compete with low-cost imports from developing countries.³³ Both Kearton and his finance director, Arthur Knight, were influenced by the example of the integrated textile companies in the US, which, despite high wages, produced fabrics as cheap as or cheaper than European mills. The key to their success lay in scale and standardisation, producing long runs of standard fabrics in large, well-equipped factories, and this was the model which Courtaulds planned to replicate in Britain. As one of Kearton’s fellow directors put it, ‘it is a concept of genius, worthy of England’s best days, that the brains of the new fibres should assume the responsibility of putting fresh life into the traditional textiles’.³⁴

      The initial plan, formulated in 1962, was the ‘Northern project’, whereby Courtaulds would take over five of the largest spinning companies in Lancashire – Lancashire Cotton, English Sewing Cotton, Tootal, Combined English Mills, and Fine Spinners and Doublers. ICI, as a major shareholder in Courtaulds, was consulted about the proposal and agreed to participate; Courtaulds was to take a 55 per cent stake in the new group, ICI the remaining 45 per cent. Negotiations on this five-way deal broke down because one of the companies thought that its shares were undervalued, but the appetite for mergers had been whetted. In 1963 two of the five, English Sewing Cotton and Tootal, got together, with ICI and Courtaulds each taking a minority stake, and in the following year Courtaulds bought Lancashire Cotton and Fine Spinners and Doublers. This was the start of an extraordinary wave of take-over activity which transformed the structure of the textile industry over the subsequent decade.

      Unlike the 1959 Act, this was a private-sector solution to Lancashire’s problems, but Kearton looked to the government for support on the issue of imports. He argued that temporary protection was justified while the industry was being reorganised. The Conservatives were still in office, and they were anxious not to offend the Commonwealth. However, ministers applauded what Courtaulds was doing in Lancashire and were willing to consider granting some relief, perhaps replacing the voluntary quotas on Commonwealth imports with tariffs. By this time the first steps had been taken on an international level to regulate the flow of textile imports from developing countries. In 1961 the US government took the lead in promoting an agreement between the principal exporting and importing countries which limited the growth of imports from developing countries to 5 per cent a year; the importing countries were also allowed to take restraining measures if imports threatened to disrupt their domestic market. This agreement was initially limited to cotton textiles and clothing, but was converted in 1973 into the Multi Fibre Arrangement (MFA), covering all fibres.³⁵

      Courtaulds welcomed these moves, but they did not directly affect Britain’s duty-free imports from the Commonwealth, which remained the industry’s greatest anxiety. In October 1964, thirteen years of Conservative rule came to an end with the election of a Labour government under Harold Wilson, and the change seemed likely to be helpful for Courtaulds. Wilson had made industrial modernisation a central plank of his election campaign. He believed that many British firms were too small to compete effectively against larger international competitors, and that a major programme of rationalisation was needed. What Courtaulds had started to do in textiles was in line with this philosophy, and Kearton was much admired by Labour ministers. In 1966 the government set up a new agency, the Industrial Reorganisation Corporation (IRC), to promote mergers, and Kearton was appointed chairman. In this role he had a hand in some of the biggest mergers of the 1960s, including the creation of British Leyland Motor Corporation and the amalgamation of the three big electrical companies, GEC, AEI and English Electric. The IRC did not involve itself in the restructuring of the textile industry, not because Kearton was chairman, but because the merger movement was rolling along at a spanking pace and needed no prodding from Whitehall.

      The awkward matter of ICI’s shareholding in Courtaulds was resolved in 1964 with an agreement which swapped these shares for Courtaulds’ stake in British Nylon Spinners. Courtaulds was now free to go ahead with an independent nylon venture and to compete against ICI in polyester. But it was a late-comer in both markets, and this reinforced the case for acquiring textile and garment companies which would provide guaranteed outlets for the company’s fibres. Kearton’s aim was to secure a share of about 30 per cent in the various markets in which its fibres were sold. In cotton spinning this was to be achieved through acquisitions. In weaving, since most of the existing mills were regarded as too small, the company built new factories on greenfield sites, making full use of the government grants which were available in areas of high unemployment.³⁶ Outside Lancashire, Kearton bought hosiery and knitwear companies in the East Midlands; they were important customers for Courtelle and nylon. He also acquired wholesalers, some with well-known brand names, in the hope of establishing a counter weight to the multiple retailers. Kearton resented the power which Marks & Spencer exerted over the garment and textile trade.

      As a large manufacturer of synthetic fibres, ICI had as much interest as Courtaulds in an efficient textile industry, but it had no wish to own textile companies. Its policy was to take minority stakes in selected firms and encourage them to make further acquisitions. Of the six companies supported by ICI during the 1960s, the strongest was Viyella. This was the creation of an ambitious entrepreneur, Joe Hyman, who, unlike Kearton, had spent his entire career in the textile business. He had started as a merchant-converter and his instincts were those of a merchandiser. In 1957 he bought control of a knitwear company, Gainsborough Cornard, which supplied nylon lingerie to Marks & Spencer and other retailers. Four years later he engineered a merger with a larger East Midlands firm, William Hollins, which owned the well-known Viyella brand.³⁷ The merged group was renamed Viyella International, with Hyman as chief executive. He was determined to push into Lancashire, which he believed would be transformed by polyester/cotton blends, just as nylon had revolutionised the knitting industry.³⁸

      In 1963 Hyman persuaded ICI to take a minority stake in Viyella as part of a £13m injection of equity and loan capital, and he promptly embarked on a flurry of acquisitions. Like Kearton, Hyman believed in the virtues of size, but his approach was more market-driven than that of Courtaulds; one of his greatest successes was to establish the Dorma brand as the market leader in polyester/cotton sheets.

      Although ICI’s investments were not directed against Courtaulds, there was an obvious risk of conflict as the two companies pursued their separate strategies. With Courtaulds now moving into nylon and polyester, they were competing for the same customers. Kearton himself appears to have had doubts about the wisdom of a head-on fight. In 1966 he suggested a deal whereby the two companies would merge their fibre interests in a single, jointly owned company, and Courtaulds would combine its textile interests with those of Viyella. But ICI was now making handsome profits from nylon and Terylene, and the idea of an all-British fibres merger was no longer as attractive as it had seemed to Chambers five years before.³⁹

      The next move came from Hyman, who had become disenchanted with ICI’s textile policy. He thought that ICI was ‘Balkanising’ the industry by taking minority stakes in a number of textile companies and encouraging them to undertake expansion programmes which they were incapable of managing. He pointed to the example of Carrington & Dewhurst, one of ICI’s clients, which was building up its knitting and finishing interests in direct competition with Viyella. In 1967 Hyman broke his links with ICI and a few months later launched a take-over bid for English Sewing Cotton, in which both ICI and Courtaulds still held minority interests. English Sewing Cotton rejected Hyman’s offer and arranged a friendly merger with Calico Printers Association; the merged company was renamed English Calico.

      Up to this point the Labour government, though not directly involved in the restructuring process, had taken a benevolent stance. In 1966 it had responded to the industry’s pleas for protection by introducing a system of global quotas on textile imports from developing countries, including the Commonwealth. The manufacturers regarded the quotas as far