This was a uniquely British problem, arising from Britain’s obligations to the Commonwealth. Although the increase in textile exports from Japan and other low-cost producers was causing concern among other industrial countries, they were more highly protected than Britain. In 1960 cotton textile imports accounted for 35 per cent of domestic consumption in Britain, compared with 5 per cent in the six Common Market countries and only 1 per cent in the US.25 The Lancashire mill owners have been criticised for failing to modernise in the first decade after the Second World War, but it is far from certain that large-scale investment in ring spindles and automatic looms would have put them in a better position to resist the import invasion.26 Such investment would only have made sense if they had been able to use the new equipment intensively, and that would have required an expanding demand for long runs of standard fabrics, which did not exist.
These issues were anxiously debated as the flow of cheap imports increased, and the 1959 Act did nothing to resolve them.27 It was clear that new initiatives were needed, from the industry or the government or both, to save the industry from continuing decline.
The 1960s: Merger Mania
By the early 1960s advocates of rationalisation on the US model were gaining ground. They argued that the industry’s weakness stemmed in large part from the lack of co-ordination between its different sections, and that this could only be remedied by consolidation into larger groups. Control over all phases of the production chain, from spinning and weaving through to finishing and distribution, would also make the manufacturers less vulnerable to the stock fluctuations which were a notorious feature of the textile business. Another argument was that the growing use of synthetic fibres was eroding the traditional boundaries between processes.28 The successful textile company would need to be a multi-fibre, multi-process operation, enjoying economies of scale in production and carrying sufficient weight in the market to bargain effectively with customers. This last point was particularly important because of the increasing dominance of the multiple retailers, especially Marks & Spencer, in the clothing trade.
An articulate exponent of this view was Cyril Harrison, chairman of English Sewing Cotton. This company, originally a sewing-thread producer, had diversified into spinning and weaving. Harrison made several further acquisitions in the 1950s and early 1960s, but his resources were limited, and if the industry was to be restructured in a substantial way an outside catalyst was needed. That catalyst then appeared in the form of Courtaulds, a larger and wealthier company than English Sewing Cotton, and one which had particular reasons for intervening in Lancashire’s affairs.
Courtaulds had built its reputation in the nineteenth century as a weaver of silk mourning crêpe; the original family company, Samuel Courtauld, was founded in 1849. In 1904, in a classic entrepreneurial coup, it secured the rights to the manufacturing process for viscose rayon. Once the process had been fully commercialised, rayon proved to be a huge money-spinner. Courtaulds was one of Britain’s most profitable manufacturing companies between the wars. But it failed to capitalise on its success. Regarding itself as a textile rather than a chemical company, it did not invest in research and missed out on the development of synthetic fibres, the first of which was Du Pont’s nylon.29 Courtaulds’ involvement in nylon came about through a partnership with Imperial Chemical Industries (ICI), which under the terms of its technical agreement with Du Pont was licensed to manufacture nylon in Britain. The two British companies formed a joint venture, British Nylon Spinners, which began producing nylon commercially in 1949.30 The next breakthrough in synthetic fibres was polyester, invented by scientists at Calico Printers Association (CPA) in 1942. The rights to this process were secured by ICI and, much to the irritation of Courtaulds, it chose to exploit the new fibre independently, under the brand name Terylene, rather than through British Nylon Spinners. The first Terylene plant came on stream in 1954.
Courtaulds was in a difficult position. Its largest business was rayon, but this was the oldest and slowest-growing of the man-made fibres. It was shut out of polyester by the CPA patents, and had only a half share in British Nylon Spinners. One way forward was to step up its own research. Work began in the early 1950s on an acrylic fibre, launched in 1957 as Courtelle, but by that time a rival product from Du Pont, Orion, was already well established in the market. Another was to expand in textiles. Courtaulds had retained an interest in weaving through Samuel Courtauld, and this side of the business was enlarged in 1957 by the purchase of British Celanese, a company which had extensive textile and garment-making operations as well as being Courtaulds’ last remaining competitor in rayon; it also had a pilot plant for the production of nylon, using a different process from that used in British Nylon Spinners. A third strand in Courtaulds’ strategy was to diversify outside fibres and textiles, principally in paints and packaging. The architect of the diversification programme was Frank Kearton, a scientist who had joined Courtaulds in 1946 as head of the chemical engineering department; he had previously worked for ICI, and had been involved in the atomic weapons project during the war. Kearton quickly established a reputation within the company as a forceful and determined manager, and was appointed to the board in 1952.
The partnership with ICI in British Nylon Spinners did not go smoothly. There were arguments over the prices which ICI charged for intermediate chemicals, and as both companies built up their separate fibres activities there was increasing scope for conflicts of interest. In the summer of 1960 Paul Chambers, newly appointed chairman of ICI, suggested to his opposite number at Courtaulds, John Hanbury-Williams, that the two companies should merge. Although Hanbury-Williams favoured this idea, his colleagues did not, and the matter was dropped. A year later Chambers revived the proposal, arguing that a merger would not only tidy up the situation in British Nylon Spinners, but would also create a powerful British fibre group which would compete more effectively against Du Pont and the other world leaders. Chambers pointed out that, whereas in Britain British Nylon Spinners made nylon, Courtaulds made acrylic fibre and ICI made polyester, Du Pont had all three fibres under its own control.
After several months of inconclusive talks, Chambers decided in December 1961 that the only way of breaking the log-jam was to appeal directly to the shareholders of Courtaulds, offering to buy their shares in exchange for shares in ICI. This would have been the biggest merger in British corporate history, and in resorting to a hostile take-over Chambers was using a technique which was still highly controversial. Some of the Courtaulds directors, including Kearton, accepted the logic of ICI’s arguments, but objected to the terms being offered. Others, especially the two members of the Courtauld family who sat on the Board, were determined to keep the company independent.
If there was a possibility of a compromise, it was removed by clumsy tactics on the part of ICI, and an acrimonious battle began. Although Kearton was a relatively junior member of the board, he played a prominent part in the defence campaign. At a memorable press conference in the middle of the contest, he lashed into ICI’s record, complaining about the high prices ICI charged for its chemicals, contrasting the slow development of Terylene with the success of Courtelle, and predicting a sharp fall in ICI’s profits. As the company’s historian records, Kearton ‘threw figures about with cheerful abandon and some inaccuracy … raised laughs, bubbled with ideas and was the total antithesis of the old, stuffy Courtaulds’.31 By conveying the impression that Courtaulds was about to enter a new era of profitable growth, Kearton helped to shift opinion in the City of London away from ICI. The outcome was an embarrassing defeat for Paul Chambers, leaving ICI with an unwanted 38 per cent shareholding in Courtaulds.
The effect of the bid on Courtaulds was to sharpen the need for a clear strategic direction, and to enhance the reputation of Frank Kearton, inside and outside the company. Although some of his colleagues were uncomfortable with his egocentric personality and erratic temper, Kearton brought a new dynamism to a company which had become a rather sleepy member of the British estabishment. He was appointed deputy chairman in 1961 and chairman three years later.
Kearton had reached the