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

of Knight’s retirement in 1979, the errors made by Kearton had been partially corrected, but profits in the textile business remained poor, and Courtaulds was losing money on its two newest fibres, nylon and polyester. Contrary to the predictions of the 1969 Textile Council report, the creation of large textile groups had not halted Lancashire’s decline, nor had mergers brought much benefit to other parts of the industry. Courtaulds and Coats Patons had bought up several of the leading hosiery and knitwear manufacturers in the East Midlands, but the subsequent performance of these firms was worse than that of the ones which stayed independent. The largest and most profitable of the independents was Nottingham Manufacturing, owned and run by the Djanogly brothers, which was a major supplier of knitwear to Marks & Spencer. According to one account, ‘Courtaulds and Coats Patons were large, highly centralised companies with little experience or understanding of the hosiery and knitwear industries, and their problems occupied little time at board meetings.’⁴⁵ Here, as in Lancashire, vertical integration had been a mistake.

      The 1980s and 1990s: Adjustment to International Competition

      The redirection of Courtaulds which had begun under Arthur Knight was taken further by his successor, Christopher Hogg. Appointed chairman in 1979 at the age of forty-three, Hogg belonged to a new generation of managers who came to the fore in British industry during the 1980s. Educated at Oxford, Hogg had taken a master’s degree at the Harvard Business School, worked as a merchant banker in the City, then joined the staff of the Industrial Reorganisation Corporation. Recruited by Kearton in 1970, he made an outstanding success of running the paints subsidiary, the most profitable of the company’s non-textile activities.

      Within a few months of becoming chairman Hogg was faced with a drastic fall in profits resulting from the so-called Thatcher recession. The new Conservative government under Margaret Thatcher imposed tight monetary policies in an effort to stamp out inflation, and the consequent rise in interest rates led to an unintended overvaluation of sterling, putting extreme pressure on exporting and import-competing industries. The immediate task was to cut costs, and the programme of plant closures which had started under Knight was accelerated. Hogg’s long-term strategy was to focus only on those businesses which had a realistic chance of becoming internationally competitive. As he said in 1981, ‘you’ve got to be reasonably certain that you can make money against the worst that imports can challenge you with’.⁴⁶

      An early decision was to discontinue the production of nylon and polyester, businesses in which Courtaulds was too small to compete against ICI and the other major suppliers. This left the long-established rayon business and Courtelle, where the company’s market position was stronger. In textiles, Hogg saw that Courtaulds had no future as a producer of commodity yarn and fabric, which would always be under attack from low-cost suppliers; most of the weaving plants which Kearton had built on greenfield sites were closed down, as were several of the Lancashire spinning mills. Another change from the Kearton era was Hogg’s determination to rebuild friendly relations with Marks & Spencer, the principal customer for Courtaulds’ hosiery and knitwear. Unlike most of the other multiple retailers, Marks & Spencer bought almost all its clothing in Britain, and it was willing to enter into a long-term relationship with suppliers. This was how the Djanogly brothers at Nottingham Manufacturing had built their success, and Hogg aimed to win a larger share of Marks & Spencer’s business, while also promoting Courtaulds’ own brands – Aristoc, Berlei, Gossard and others – to other retailers.

      The old policy of vertical integration had been largely abandoned by Knight, and Hogg established Courtaulds Textile Group as a separate subsidiary in 1985. The management skills required in textiles and clothing – design flair, fashion consciousness, quick response – had little application for the rest of Courtaulds, which consisted mainly of capital-intensive chemical and industrial businesses. To run the Textiles Group Hogg appointed Martin Taylor, a former financial journalist, who set in train a radical overhaul of the business. ‘We found that in too many products we were number 4 or 5 in Britain, and number 29 in Europe. We had to make ourselves more international, and we had to simplify, do fewer things.’⁴⁷ Lancashire spinning and weaving were cut back even further, and the Samuel Courtauld weaving business, the oldest part of the company, was sold to a Japanese company. At the same time Courtaulds continued to invest in products such as stretch fabric where it had a technical edge over its rivals.

      The assumption on which these plans were based was that protection against low-cost imports was likely to diminish and eventually disappear. Although the Multi Fibre Arrangement was renewed for a further five years in 1981, the developing countries were increasingly hostile to a system which had been envisaged as a short-term measure to give the older textile industries time to reorganise. The Uruguay Round of GATT trade negotiations, which began in 1986, ended five years later with an agreement that the MFA would be phased out by 2005. This was in line with the forecasts made by Martin Taylor and his colleagues. The only businesses worth having were those which could survive in an open world market: Courtaulds had to turn itself into an international company. In the mid-1980s 90 per cent of the products which Courtaulds Textiles sold were made in Britain, and 90 per cent of its sales were in Britain. The objective, over a period of a decade, was to reduce the first of these two figures to 40 per cent, by sourcing more goods in cheaper overseas locations, and the second to 50 per cent, by exporting more British-made products and by overseas acquisitions.

      In 1989 Hogg took the separation between fibres and textiles to its logical conclusion, floating Courtaulds Textiles on the stock exchange as an independent company; this was an early example of ‘demerging’, a practice which was to become fashionable during the 1990s. Although Taylor left the company in 1993 to be chief executive of Barclays Bank, the strategy of specialisation and internationalisation which he and Hogg had set in place was maintained. The final step in the unwinding of Kearton’s grand design came in 1996, when the remaining Lancashire spinning mills were sold to Shiloh, an old-established firm run by Edmund Gartside, the third generation of a family which had controlled the business since 1874. Shiloh’s survival was based on flexibility, service and the ability to respond quickly to a wide variety of customer demands – not the characteristics of the giant vertical enterprise which Kearton had constructed in the 1960s.⁴⁸

      During the 1990s the British textile industry continued to contract as more firms shifted part of their production overseas. Among the survivors, Courtaulds Textiles appeared to be relatively well placed at the end of the decade, specialised as it was in a much narrower portfolio of businesses, principally lace and stretch fabrics, lingerie and hosiery, casualwear and underwear. Marks & Spencer was by far its largest customer, accounting for more than 40 per cent of sales, but substantial progress had also been made in internationalising the company along the lines mapped out in the mid-1980s.⁴⁹ In 2000, however, one of the largest US clothing manufacturers, Sara Lee, owner of Playtex, Pretty Polly and other brands, launched a successful bid for Courtaulds Textiles. Although this was a disappointing outcome after the efforts that had been made to reorganise and re-position the company, it could also be seen as another example of the internationalisation of British industry. There was a reasonable prospect that the combination of Courtaulds’s brands with those of Sara Lee would create a stronger force in world markets. (The same fate had overtaken Courtaulds itself, which was taken over in 1998 by the Dutch company, Akzo Nobel; the main attraction for Akzo was Courtaulds’s paints business – the fibres division was sold off.)

      While Hogg and Taylor were setting Courtaulds on a new course, the other textile groups which had been formed during the merger wave of the 1960s were going through upheavals of their own. Carrington Viyella, like Courtaulds, was hard hit by the recession of the early 1980s, and it was no longer of much interest to ICI, its principal shareholder. The huge profits which ICI had made in nylon and Terylene in the 1960s had evaporated in the 1970s as a result of worldwide over-capacity, and fibres were no longer regarded as a core business. But Carrington Viyella had an array of strong or potentially strong brands – Viyella, Dorma, Van Heusen and others. These assets attracted the attention of David Alliance, an entrepreneur somewhat in the Hyman mould. Alliance, scion of an Iranian textile merchanting family, had come to Britain in 1959. Starting in Manchester as a merchant-converter, he began buying up near-bankrupt textile manufacturers, and he used Spirella, one of the acquired