Durham E-Theses Growth and Transition in the Cleveland Iron and Steel Industry, 1850 to 1914. JAMES, STEPHEN How to cite: JAMES, STEPHEN (2013) Growth and Transition in the Cleveland Iron and Steel Industry, 1850 to 1914., Durham theses, Durham University. Available at Durham E-Theses Online: http://etheses.dur.ac.uk/6957/ Use policy The full-text may be used and/or reproduced, and given to third parties in any format or medium, without prior permission or charge, for personal research or study, educational, or not-for-prot purposes provided that: • a full bibliographic reference is made to the original source • a link is made to the metadata record in Durham E-Theses • the full-text is not changed in any way The full-text must not be sold in any format or medium without the formal permission of the copyright holders. Please consult the full Durham E-Theses policy for further details. Academic Support Oce, Durham University, University Oce, Old Elvet, Durham DH1 3HP e-mail: [email protected] Tel: +44 0191 334 6107 http://etheses.dur.ac.uk Growth and Transition in the Cleveland Iron and Steel Industry, 1850 to 1914. Stephen James Abstract The dramatic expansion of the iron industry in Cleveland from 1850 propelled the district briefly to the position of the world’s largest iron-producing centre and brought about the formation of a major industrial cluster in a previously unindustrialised area. By the end of the 1870s, however, its prosperity was threatened by developments in steel-production technology and the growth of iron and steel output in the US and Germany. The first part of this thesis examines the initial development and early expansion of the industry. Using a data set of firms that entered the iron and related sectors between 1850 and 1880, the study assesses the contribution of business networks to growth. It is suggested that an important part was played by an existing network of Darlington-based Quaker business interests, and that development may have taken a different form without the presence of the network. The second part investigates the transition of the industry from the 1870s to 1914 to determine how effectively the district’s firms responded to significant changes in technology, international competition, corporate legislation and financial markets. The study finds that some firms did adapt and grow, and the district made the transition to steel successfully. Steel technology was adopted when technical and commercial circumstances allowed, and in particular the basic open hearth process was actively investigated from an early stage. Flexible use was made of the free availability of incorporation and of access to securities markets. An extended case study of one company, Dorman Long, illustrates the beginnings of the development of corporate enterprise in the industry. 1 2 Growth and Transition in the Cleveland Iron and Steel Industry, 1850 to 1914. Stephen James Submitted for the degree of: Doctor of Philosophy History Department Durham University March 2013 3 Contents Abstract 1 Figures 6 Tables 6 Abbreviations 9 Chapter 1: Introduction 12 1.1 Aims and background 12 1.2 Relationship to previous studies 13 1.3 Plan of the work 16 1.4 Limitations and omissions 20 1.5 Sources 21 Part 1: Development and Growth Chapter 2: Conceptual Issues in Business Networks and Industrial Clusters 24 2.1 Introduction 24 2.2 Explanations 26 2.3 Networks and Theory 29 2.4 Location and Agglomeration Economies 37 2.5 Dynamics of Clusters 42 2.6 Networks, Knowledge Spillovers and Cluster Development 46 2.7 Conclusions 49 Chapter 3: Networks and the Development of the Cleveland Iron Industry 51 Cluster from 1850 to 1880 3.1 Introduction 51 3.2 Development of the Cleveland Iron Industry Cluster 51 3.3 Networks of Firms and Investors 61 3.4 Networks and Performance 80 3.5 Conclusions 87 Part 2: Transition 90 Chapter 4: Iron and Steel in Transition – An Outline of the Issues 90 4.1 Introduction 90 4.2 Trends in Output and Trade in Iron and Steel 92 4.3 Explanations: Entrepreneurial Failures and Institutional Constraints 98 4.4 Market and Resource Constraints 108 4.5 Conclusion 115 Chapter 5: The Effects of Changes in Corporate Legislation on the Iron and 117 Steel Industry in Cleveland 5.1 Introduction 117 5.2 Trends in Company Registration in Cleveland 121 5.3 Bolckow Vaughan: the first five years of incorporation 131 5.4 Long-term Finance and Capital Expenditure: a comparison between Bolckow 139 Vaughan and Dorman Long 5.5 Conclusions 150 4 Chapter 6: Technology and Products 154 6.1 Introduction 154 6.2 Trends from 1880 155 6.3 From Iron to Steel 162 6.4 The Development of the Basic Open-Hearth Process 172 6.5 Networks and the use of the BOH process in Cleveland 206 6.6 Conclusions 213 Chapter 7: Case Study of Dorman Long 215 7.1 Introduction 215 7.2 The Growth of Dorman Long in Outline 216 7.3 Organisational and Management Developments 224 7.4 Products, Distribution and Marketing 239 7.5 The Rudiments of a Strategy 255 7.6 Conclusion 266 Chapter 8: Conclusions 268 Appendices 277 Appendix 1 277 Appendix 2 297 Bibliography 304 5 Figures and Tables Figures Figure 2.1: Population in Middlesbrough and Stockton, 1831-81 26 Figure 2.2: Trust, Transactions Costs and Growth. 35 Figure 2.3: Business Networks, Social Capital Externality Effects and Growth 36 Figure 4.1: Unit Value of Exports and Imports (£ per ton), 1870-1913 95 Figure 4.2: Exports, Imports and the Balance of Trade by Volume, 1887-1913 97 Figure 4.3: Exports, Imports and the Balance of Trade by Value, 1887-1913 97 Figure 5.1: Incorporation of Cleveland Iron, Steel and Related Engineering Companies, 1860-1912 122 Figure 5.2: Business Failures in Cleveland Iron and Steel, 1850-99 123 Figure 6.1: Manufactured Iron Output in Cleveland, 1872-1900 157 Figure 6.2: British Steel Output, 1889-1918 161 Figure 6.3: Bessemer and Open Hearth Steel Output in Cleveland, 1889-1900 161 Figure 6.4: Cleveland and Hematite Pig Iron Production (tons), 1883-1907 170 Figure 6.5: Cleveland Hematite Pig Iron Production (per cent), 1883-1907 171 Figure 6.6: Cleveland Ore Production and UK Ore Imports, 1870-1913 171 Figure 7.1: Capital Expenditure Monthly Returns – An Example from 1908 232 Figure 7.2: The Dorman Long Group, c1910 238 Figure 7.3: Extracts from Dorman Long Pocket Companion, 1910 241 Figure 7.4: Dorman Long Profits, 1890-1914 266 Figure 7.5: Return on Capital Employed, 1885-1914 266 Tables Table 2.1: Pig Iron Output, 1854-84 26 Table 3.1: Cleveland Pig Iron Output and Shipments from Teesside 53 Table 3.2: Blast Furnaces in Cleveland and North East England, 1855-71 54 Table 3.3: Puddling Furnaces in Cleveland and North East England, 1850-71 54 Table 3.4: Iron and Engineering Firms Established on Teesside, 1760-1879 55 Table 3.5: Connections between Cleveland Investors, 1850-79 58 6 Table 3.6: Connections between Cleveland Firms, 1850-79 58 Table 3.7: Characteristics of Investors Entering the Cleveland Iron and Engineering Industries, 1850-79 60 Table 3.8: Characteristics of Firms Entering the Cleveland Iron and Engineering Industries, 1850-79 60 Table 3.10: Coefficients for Logistical Regression Models 86 Table 3.11: Survival Odds (Model 4) 86 Table 3.9: Model Variables 82 Table 4.1: British Iron and Steel Output, 1860-1414 92 Table 4.2: Pig Iron Output in Britain, Germany and the USA, 1870-1913 92 Table 4.3: Steel Output in Britain, Germany and the USA, 1870-1913 92 Table 4.4: British Iron and Steel Exports and Imports 94 Table 4.5: Iron and Steel Output, Imports and Import Penetration 94 Table 4.6: Unit Value of Exports and Imports of Plates and Bars, 1913 96 Table 4.7: Exports and Imports of Plates and Bars, 1910-1913 96 Table 4.8: Steel Output by Process, 1889-1914 (selected years) 110 Table 4.9: British and US Prices after Duty and Freight Charges (per ton), 1883 111 Table 4.10: US Output and Imports of Rails, 1870-1884 112 Table 4.11: German Tariffs on Iron and Steel, 1879 113 Table 5.1: Joint Stock Company Registration in the Cleveland Iron and Steel Industry 122 Table 5.2: Regional Distribution of Bolckow Vaughan Shareholders 132 Table 5.3: Flotation of Bolckow Vaughan in 1864-5 134 Table 5.4: Bolckow, Vaughan Dividend Payments, 1865-69 138 Table 5.5: Dividends and Interest on Vendors’ Shares 139 Table 5.6: Sources of Funds – Bolckow Vaughan 1870-1914 141 Table 5.7: Examples of Bolckow Vaughan Bank Borrowing 144 Table 5.8: Sources of Funds – Dorman Long, 1889-1914 145 Table 5.9: Dorman Long Expenditure on Acquisitions, 1898-1914 146 7 Table 5.10: Dorman Long Companies’ Gearing 148 Table 6.1: Manufactured Iron in Cleveland, 1872-1884 156 Table 6.2: Finished Iron (puddled/bar iron), 1881-1900 158 Table 6.3: Firms Using or Experimenting with Basic Open-Hearth Production up to the mid-1890s 177 Table 6.4 Steel Output by Process, 1900 and 1910 178 Table 6.5: Bell Brothers Basic Open-Hearth Experiments (1889-91) – Average Charge Composition 183 Table 6.6: Bell Brothers Basic Open Hearth Experiments (1889-91) – Costs, Revenues and Output 184 Table 6.7: Official British Minimum Standards for Steel Plates, c1896 188 Table 6.8: Iron Ore Prices, 1870-1913 194 Table 6.9: Clarence Steelworks Basic Open Hearth - Costs, Revenues and Output, 1901-02 197 Table 6.10: Clarence Steelworks Charge Composition, 1899-1902 197 Table 7.1: The Expansion of Dorman Long’s Interests, 1876-1914 216 Table 7.2: Sales and Profits, 1882-1889 219 Table 7.3: Board Membership for Dorman Long, Bell Brothers and NESCo, 1903 226 Table 7.4: Capital Spending on the Construction and Bridge Department, 1890-