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Encyclopedia set from 1914
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Business trends, 1914-1918

The dominant business stories of years 1914-1918 normally centre around the Shell Scandal of 1915 and profiteering on government contracts. However, throughout the years of conflict the structure of business in the UK was still going through significant change and expansion. In some ways, the conflict influenced and hastened these developments.

Overall though, it appears that a more general evolution of the business stock in the UK continued in the background during the war years, moving the economy from the first industrial nation that had powered the Victorian economy towards a more modern industrial structure that, despite the growth of the digital economy, still predominates today.

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Not surprisingly, the demands of a wartime economy led to huge growth in orders for munitions and related materials (iron, coal, textiles and shipbuilding etc.). Most of this boost to industrial activity was driven through larger businesses, hastening the growth of some of the big industrial conglomerates of the twentieth Century - such as Vickers, Courtalds and the group of chemical firms that merged to set-up ICI in 1926.

The number of new companies incorporated each year was actually very low between 1914 and 1918 - falling to under 2,000 a year, less than a third of the number seen each year in the decade before. As a result, in these already large staple industry sectors, the demands of a wartime economy hastened further the concentration of production. Consequently, the average employment size per enterprise nearly doubled in the chemical industry between 1911 and 1921, with growth of nearly 50% in the engineering and metals trades as well.

Nevertheless, this is far from the complete picture. In reality, despite the emergence of a number of large industrial conglomerates in the UK, the war years still witnessed a growth in the business population. The number of UK businesses – based on a definition broadly equivalent to what we would use today – still increased from about 1.4 million to 1.52 million between 1911 and 1921; this rate of growth is on a par with those recorded for the business stock so far in the 21st Century.

Some wholly new industrial activities were being set-up in the war years. Indeed the needs of war production encouraged this, notably in aircraft manufacture. Dozens of small aircraft firms started in the war years, leading to a fragmented industrial structure that only began to be consolidated decades later. Similar developments were apparent in the motor vehicle trades.

The number of employers actually fell in the decade up to 1921 by around 50,000 but this was more than offset by a near 200,000 increase in the number of own-account workers.

However, it was the growth of what we would now call self-employment that led to the rise in the business stock during this period, despite the growth of some very large industrial conglomerates and new industries. The number of employers actually fell in the decade up to 1921 by around 50,000 but this was more than offset by a near 200,000 increase in the number of own-account workers.

Similar growth in own-account employment occurred amongst a number of manual trades as well. Also, those professions deemed in some way superior witnessed very strong growth in own-account workers. The number of own-account workers in engineering went up by 40% and in science, by as much as 160%. 

All this illustrates that the UK economy was evolving from the industrial powerhouse that had been evident in the Victorian and Edwardian economy, towards a modern economy with an enhanced role for the professions and services. In the days before the ‘in-house’ lawyer or accountant, or before a state health service, these new activities were dominated by self-employed own-account workers.

The same applied to many technical trades who moved between businesses to provide a service rather than work for a dedicated employer. This trend, which developed in the early years of the new century, continued very strongly during the period of conflict. So, despite the growth of some very large industrial employers, the business stock still grew.

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Then and now

The years of the First World War in hindsight proved to be the peak of a surge in the business stock that had been evident from the Napoleonic war period onwards, or even earlier. The growth in self-employment came to an end in the 1920s and early 1930s. Many of the UK’s large staple industries such as coal, steel and textiles went through a long period of rationalisation and consolidation and 30 years later some were in state ownership.

Whilst the term ‘entrepreneur’ was not part of everyday language a hundred years ago, it had been used to describe risk takers and ‘organisers of business’ since the late 1700s, mostly in continental Europe. The evolution from the noun describing an ‘entrepreneur’ into the verb ‘entrepreneurship’ began in the inter-war years.

The newer definition placed more emphasis on innovation and driving change in business, creating separate roles for business owners and managers. Indeed, entrepreneurship was still rarely mentioned over the middle years of the last century. The new trend towards management science swept in and replaced owner management in most of the bigger firms with an emphasis on bigger, more organised and productive business units with economies of scale. A further boost to this trend occurred with World War Two and the post war phases of nationalisation and state sponsored merger, notably via the Industrial Reorganisation Commission.

Larger retailers became commonplace. Big regional and national construction firms were set-up during the house building booms of the 1930s and post 1945 years, as well as with the motorway construction work in later decades. The service sector continued to grow as well but the professions increasingly moved into salaried work.

As a result, about fifty years after the end of the First World War, the stock of UK businesses was only marginally above the level reported in 1921. Indeed, some estimates indicate it could have even been slightly lower. During the same period, the population increased by 25% and national output in real terms had increased three-fold, demonstrating the growing role of larger firms.

Interest in the contribution of small firms to the economy grew again during the 1960s and 1970s, supported by higher incomes and a growing service sector, as well as technological change. Political interest in small firms also grew, leading to a succession of government inquiries and initiatives, particularly the Bolton Committee, 1969-71. The first - and so far only - Cabinet Minister for small firms was appointed in 1977 and by the end of 1979 there were about 1.9 million registered business is the UK.

The upward trend in business numbers has continued ever since while interest in entrepreneurship has also revived. As in the war years a century ago, much of the revival has come from the growth in self-employment rather than large companies. It is estimated that there are currently in the region of 4.9 million businesses in the UK.

Of these, about 300 firms active in the UK today were first established between 1914 and 1918 including BPB plc, Westland Aviation, A. F. Blakemore (SPAR wholesalers), UBM (United Newspapers) and Crookes Healthcare.

Though the rise in the overall number of businesses in the UK since the 1970s has wound back due to a concentration of activity amongst larger firms, this trend is a long way from being fully-reversed. Based on real GDP per business unit, if we had the same average business size in 2014 as on the eve of the First World War we would need about 10.5 million firms, rather than the 4.9million currently in operation.

Professor Richard Roberts

Richard has more than 30 years’ experience researching the SME (small and medium sized enterprises) sector and is a member of the ACCA SME Advisory Panel, the IFRS SME Advisory Panel and CASE. He is also a non–executive director of the National Council for Graduate Entrepreneurship, a member of The Department for Business, Innovation and Skills (BIS) Access to Finance Advisory Group and the Secretary of State’s Advisory Panel on the UK Economy.  

Sources:
Historical National Accounts and Companies House Registers
NIESR, Occupation and Pay in Great Britain, 1906-60, CUP, 1965
Committee on Trade and Industry, Factors in Industrial and Commercial Efficiency –Industry Survey, HMSO, 1927
Committee of Inquiry on Small Firms, Final Report, Cmnd 4811, HMSO, 1971
ONS, Business Population Estimates (new window), Current Edition.

 

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Barclays history

Barclays timeline: 300 years and counting

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