As the 1840s passed, interest in railways grew frantically. Every town wanted to be on the railway system for fear of being left isolated, and every investor wanted to be involved in the railways for fear of missing what was seen as a guaranteed means to fortune. Comparisons have been made with the so-called ‘Dot Com’ at the dawn of the twenty-first century, but underestimate the impact of the railways. The new railway companies were amongst the still relatively small number of business undertakings in which the public could make an investment. Business activity in the 1840s was small business. The shipping lines were still developing, but these had only developed slowly from trading arrangements in which a merchant would buy a ship with the help of close family or a few associates. Companies seldom had large headquarters, but instead the proprietor would often live above the business, and if it was larger, he would live above the counting house rather than the workshops or warehouses.
That the railways were an uncertain investment became obvious for those with cool heads as early as the 1820s. Even before this, within living memory, there had been the ‘canal’ of 1791-94, when forty-two new canals had received parliamentary approval. Even earlier, there had been the South Sea Bubble of 1719-20.
Boom and bust
The boom of the 1820s had been created not just by the railways but by changes in the legislation governing companies and limiting the liability of shareholders. No longer could a creditor bankrupt the owners of a business if it was a limited company. Money was readily available and this encouraged many entrepreneurs to float new concerns, including utility companies and mining. Nevertheless, during 1824/25, there were already many railway companies jostling for the support of investors. In the enthusiasm that followed the easing of investment and the arrival of a new mode of transport, no less than seventy railway companies published prospectuses, and of these about forty got as far as Parliament, but only the Liverpool & Manchester, which in fact preceded this first boom in railway shares, was built, and that after its first bill was defeated in the House of Commons in June 1825. Abandoned in the parliamentary waste paper bins lay plans for lines that would have linked the capital with Birmingham, Bristol, Falmouth, Lancashire and South Wales, but for which capital would never be raised.
This list tells us something about the state of Great Britain at the time. Bristol had been an important port for many years, and Birmingham was already established as a centre of industry, as was Lancashire with its cotton mills. South Wales was becoming increasingly important because of iron and coal. Falmouth was a far more important port than today, and indeed when the Cornish Railway was planned, it was to Falmouth, home of the Falmouth Packet Service, carrying mails and dispatches to and from the country’s still growing colonial empire as well as other territories and which flourished between 1688 and 1850.
The first boom came to an end in 1825 with a series of banking failures, a poor harvest and the failure of the measure to authorise construction of the Liverpool & Manchester which completely undermined investor confidence. It was not until the line eventually was authorised and opened in 1830 that interest was re-awakened, but even that failed to materialise in a further boom due to the constitutional crisis over the Reform Bill. However, by 1833, interest in railways and confidence in them as investment projects had returned to the extent that several important schemes were authorised, beginning in 1833, and by 1836 an early peak of legislative activity was reached, so that in 1836/37, more than 1,500 route miles, requiring £34.6 million in capital, received parliamentary approval. As today, stock market booms matched that of economic activity generally, so that a downturn led to a recession and falling share prices, while economic recovery saw a surge. Boom and bust alternated as the economy overheated, and even today, smoothing out these phases of the economic cycle has not been mastered by finance ministers and central banks.
The next stage of the cycle was a further upsurge in the economy and in new railway projects, starting in 1844. As with every such boom, the initial projects were, for the most part, sound and even long overdue as they had been delayed by the poor economic outlook and lack of confidence. As confidence grew, many schemes that were, at best marginal, were promoted. Railway shares soon became everyone’s way of sharing in the growing wealth of the nation, and the stock market meant that they could be easily traded, as long as the boom continued. Certainly, many people became wealthy in a very short period as the value of their investments rose and they were able to realise the capital by selling their shares.
THE RAILWAY CONTRACTOR:
Thomas Brassey, 1805-70
Having started his career as a land agent and surveyor, heavily involved in the development of Birkenhead, in 1834 he turned to contracting, with his first project being the New Chester Road at Bromborough. The following year, his first railway contract was for the Pendridge line on the Grand Junction Railway, working with Joseph Locke. The working relationship between the two men continued for the rest of Brassey’s life, throughout Great Britain and the Continent, including the London & South Western Railway; and most of the Paris-Le Havre Railway.
By 1841, Brassey was one of the country’s leading contractors. With William Mackenzie and John Stephenson, he built the Lancaster & Carlisle Railway and worked on the Caledonian Railway, but Stephenson died in 1848 and Mackenzie became seriously ill in 1849. One of his most important contracts was on the Great Northern Railway between London and Peterborough. He also became involved with other contractors, including Peto and Betts, including work on the Grand Trunk Railway in Canada. This new partnership financed and built the Victoria Docks on the Thames, and the London Tilbury & Southend Railway, which was one of several also operated by Brassey, a true contractor’s line. All in all, he built more than 6,500 miles of railway, including a sixth of the British network. He was one of the few contractors to survive the failure of the bankers Overend Gurney, doubtless because of his own considerable wealth, for he left a fortune of £3.2 million (around £150 million at today’s values).
What constituted a viable railway project in 1844 and what constituted one even fifty years later, let alone today, is another question. Travel was so difficult in the early and mid-nineteenth century that many lines were built to cover very short distances. The London & Blackwall was one case in point. The poor prospects of many shorter lines was later highlighted by the arrival of the street tram, especially after tramways were electrified, and the inflexibility of the steel rail was then demonstrated when the motor vehicle became a significant force in transport after the First World War.
Despite this, many of the early schemes soon appeared to be overoptimistic and their prospects unrealistic, and to this list was added those that were simply fraudulent. As the poor prospects of many lines and the sheer lack of substance in others became clear, confidence faltered and then faded away altogether. Credit tightened, and those who had bought railway shares were stuck with them, for better or for worse. Even so, between 1844 and 1847, Parliament sanctioned the construction of more than 9,000 route miles of railways and the raising of more than £500 million. The route mileage alone amounted to around 40 per cent of the peak UK network, and some 90 per cent of that today, although there is the important caveat that the figures for the time included what is now the Republic of Ireland. Nevertheless, when reality dawned, more than a third of the route mileage authorised was not built.
The lessons of this time were quickly learnt, and when subsequent booms occurred in the 1850s and 1860s, they were not on the scale of 18441847. Another reason for this was that the industry was already maturing and, later in the century, the main developments involved well-established and substantial companies, while cooperation between companies became increasingly commonplace, allowing efficient running of through trains between London and Scotland, reaching a climax in the 1880s with four railway companies: the Great Northern, Midland and North Eastern, joining the North British Railway in construction of the great bridge across the Firth of Forth.
In the meantime, the collapse of confidence in railway shares had left many lines uncompleted. Raising funds proved difficult, even impossible. The early years of the railway age created one prosperous sector, the contractors who built the lines. Faced with the prospect of no work, many of these cash-rich businesses either provided funds to their hard-pressed clients in return for a substantial stake in the company, or simply got on with completing the work. There were many advantages to the contractors in taking this course. They were kept busy, while whenever new opportunities arose, by offering to build the line in return for a substantial share in it, eliminating the need to tender against other contractors. In some cases, they were able to move their skilled labour forces and equipment in its entirety from one project to the next in what became a rolling programme of railway construction. Some railway lines were even taken over by contractors to the extent that ‘contractors lines’ were operated for an agreed period after completion.
THE MAN BEHIND ‘THE TIMES’:
Thomas Tilling, 1825-1893
Born in 1825 at Gutter’s Hedge Farm, Hendon, Middlesex, then a small village outside London, Thomas Tilling started his business in 1846, buying a horse and carriage for £30. Presumably his early business was private hire work, for in January 1850 he purchased his first horse bus and the licence to work four journeys a day in each direction between Peckham and Oxford Street. In just six years, he had seventy horses, most of which were used for his growing fleet of horse buses, but which also undertook other carriage work.
Until the second half of the nineteenth century, fire brigade provision in London was provided by insurance companies who looked after their own clients’ premises, and it was not until 1866 that the Metropolitan Fire Brigade was formed. The new brigade contracted Thomas Tilling to train and supply horses for the fire engines, and the last part of their training was employment on his horse-bus services so that the animals became used to traffic on the busy city streets. Tilling was a successful horse-bus proprietor, running his vehicles to a timetable and using set stops, so that they were regarded as more punctual and reliable than his competitors, something which he capitalised on by using the fleetname of ‘TIMES’, painted in large letters on the side of his buses, although illustrations survive of buses carrying his own name. His mode of operation was to be the basis for future regulation of bus services.
When Tilling died in 1893, he was the biggest supplier of horses in London with a stable of 4,000 animals and 250 horse buses. He was buried at Nunhead cemetery.
The business passed to his sons, Richard and Edward, and son-in-law, Walter Wolsey. They continued his work, turning the business into a limited company, Thomas Tilling Ltd, in 1897, and in 1904 were the first to put motor buses into service in London. In 1907, they introduced the first longer-distance or commuter motor-bus service, with thirteen buses working a service between Sidcup in Kent and Oxford Circus. In 1909, a pooling agreement with the LGOC enabled the company to remain independent while the ‘General’ was acquiring many other companies, and as part of this Tilling’s routes were integrated into the LGOC’s new route-numbering scheme. One consequence of the pooling was that the only scope for expansion was outside the capital.
In the years that followed, the company started to develop bus services in provincial cities, starting with Folkestone in 1914 and followed by Brighton in 1916, with the predecessor of what became Brighton, Hove & District. Between the wars, Tilling collaborated with the railways in developing bus services, especially in rural areas. The London business was nationalised into London Transport in 1933, and the provincial business into the British Transport Commission in 1948. A number of non-transport businesses survived nationalisation. A distinctive feature of the Tilling bus companies was the used of the Tilling-Stevens petrol electric buses for many years, a means of solving the problems of early gearboxes and easing transition from horse-bus driving to motor-bus work.
One of the most prominent amongst such contractors was Thomas Brassey who worked on the Grand Junction Railway and the London & South Western Railway. With partners, he financed and built the Victoria Docks on the Thames, and the London Tilbury & Southend Railway, which was one of several he also operated. Later, he was one of the few contractors to survive the failure of the bankers Overend Gurney, doubtless because of his own considerable wealth, for he left a fortune of £3.2 million (around £150 million at today’s values).
Once confidence returned, the contractor was still to be found offering his services in return for a share of the line, as we will see later with the Central London Railway, the predecessor of today’s Central Line.
The Great Exhibition
The famous Great Exhibition of 1851 was a defining moment in the history of transport in London. The concept of exhibitions really dates from the Victorian era and the Great Exhibition, for which the Crystal Palace was built in London’s Hyde Park, was simply the grandest and most famous of them of all. For the railways and the horse omnibus proprietors, these great events offered considerable business but brought with them substantial logistics problems. Such exhibitions could not have been possible before the railway age as no other means existed of moving so many people. In an age that still knew few public holidays, the excursion trains to the Great Exhibition were the first examples of mass holiday travel. The nearest thing to this before the Great Exhibition had been the more popular racing events, especially in the Home Counties, where they had the huge population of London as a market.
This ability to convey large exhibits more economically and efficiently than any other mode of transport also came into play with the Great Exhibition, and indeed the exhibits included two steam locomotives. Open from 1 May to 15 October 1851, the Great Exhibition saw six million tickets sold. While the site did not have a railway connection and many arrived on foot, the business generated for the railways and bus operators was considerable. It also boosted other businesses as well, with Thomas Cook, founder of the eponymous travel agency, becoming the Midland Railway’s agent for the Great Exhibition in London, for which he provided tickets and other arrangements for 165,000 people.
For the railways it showed many of their existing arrangements were far from suitable. On the Great Northern Railway, its London terminus at King’s Cross had still to be built, but the temporary station at Maiden Lane was named ‘King’s Cross’ in the timetable, even though it consisted of just two timber platforms, which had to cope with the traffic of 1851, and also was used by Queen Victoria and Prince Albert for their trip to Scotland that August. At London Bridge, the London Brighton & South Coast station was only half complete.
The LBSC was not above making the most of circumstances to grow its business. It was no coincidence that when the Crystal Palace was demolished it was moved to Penge Park, sold by its owner, an LBSCR director to a company associated with the LBSCR, who opened a new branch ready for the official re-opening of the re-erected building by Queen Victoria in 1854. That this was an astute move can be judged by the fact that a single day in 1859 produced 112,000 passengers visiting the Palace.
The remaining conservative horse-bus owners who had resisted placing seats on the rooftops of their vehicles were also forced to accommodate passengers ‘on top’. This was done by the simple expedient of placing a plank longitudinally along the curved roof, which acted as a back support and, if all else failed, something to cling to. While the railways offered attractive excursion fares for the exhibition traffic, the bus operators were less generous, seeing a one-off opportunity to raise their fares. When the exhibition traffic was followed by a slump in business for the horse buses, fares had to be reduced, often to levels lower than those prevailing before the exhibition. No doubt many regular travellers had been driven off the buses by the increased fares, and that this was simply profiteering of the most basic kind, but it was not the last time that raising fares would be used as a means of regulating traffic.
A better horse bus
The double-deck bus is seen by many, especially foreign visitors, as an English icon. Yet, more than once, foreign influences have developed the double-deck bus. The London General Omnibus Company itself was not a British undertaking at the outset, being formed in Paris in 1855 as the Compagnie General des Omnibus de Londres. The aims of the new company, the LGOC, were ambitious, seeking to purchase as many of the existing horse-bus operators as possible prior to reorganising the network in London. For the first time, there was to be a controlling entity with plans for a network of routes. Yet, there was far more to it than coordination and rationalisation of routes. The horse bus had made remarkably little progress over the early years, and, on 1 January 1856, the LGOC advertised in the press for the ‘best design and specification for an omnibus that, with the same weight as at present, will afford increased space accommodation and comfort to the public’. A prize of £100 was offered, and, since no doubt most of the designs would have come from body-builders, there was also the prospect of good business. No less than seventy-five entries were received, and these were shown to the press on 16 February at the LGOC’s new offices, 454 West Strand, now home to the South African High Commission.
Designing a completely new double-deck horse bus was easier said than done. For something to have been completely new would have required a tremendous leap of the imagination.
Yet the LGOC was disappointed. The winner was a design by RF Miller, from Hammersmith. This was damned with faint praise as it ‘contains several improvements in the details of its construction over those at present in use, although in external appearance it does not present much novelty’. The harsh truth was that the judges had not found ‘any one design of super eminent merit, or calculated in its present shape to afford that increased amount of comfort and accommodation your company, with praiseworthy foresight, desires to give the public’. In the end, the LGOC decided to opt for a selection of features from several of the more promising designs. Miller’s design was essentially an adaptation of the single-deck bus, with a clerestory roof that incorporated a seat for offside passengers only, which in many ways was a backward step as it could carry fewer passengers than earlier horse buses with ‘outside’ accommodation. The innovations consisted of what were described as ‘improved steps’, which meant simply that instead of iron rungs the passenger had metal treads and a handrail. Despite advances elsewhere, there were still no brakes and no means of communication between conductor and driver, even though as early as April 1847, a design for a bell for passengers to communicate with the conductor had been patented by Benjamin Browne.
One reason why the pace of technological change accelerated so much during the Victorian age was that news of developments passed around so much more quickly than during earlier periods. Publications such as the Mechanics’ Magazine ensured that knowledge was disseminated, and the railways in particular had a growing and active press.
Far more promising was a design by TM Clemence of Westminster, with a wider clerestory on which there were back-to-back seats on both sides, and access by a ‘winding ladder’ with handrails at both ends of the vehicle ‘so that with these means a female might with propriety and ease ascend the roof seats. There was also a handrail inside the bus, and this contained a wire to which handles were attached at intervals so that passengers and the conductor could ring a bell near the driver. Yet this was a step too far for the LGOC, whose desire for innovation was stifled by its own innate conservatism.
The LGOC never had a complete monopoly over bus travel in London. Not all of the existing proprietors sold out to it, so by 1857, the company had just 600 buses, of which thirty-three were in reserve, and of these just 450 worked daily, with 5,879 horses, of which 4,451 were required daily. The average daily mileage per horse was just twelve miles against fifty-four miles for each bus. As late as 1880, a group of city-bound commuters from the London & South Western Railway formed the Metropolitan Express Omnibus Company, to operate horse buses between Waterloo and the City. This company was taken over within a year by the Railways & Metropolitan Omnibus Company, but within five years it was operating eighteen twenty-six-seat buses and carrying 2.5 million passengers annually. In 1858, the LGOC finally emigrated from Paris to London, and became a wholly British organisation.
A contemporary and rival for the LGOC was Thomas Tilling, whose empire was founded during the 1850s. Tilling started with just one horse-drawn bus in Peckham, but in due course his interests in buses eventually ranged much further than London, where the company he founded operated a substantial number of services, especially south of the river.
Weight was always a problem for the horse bus, and eventually the practical limit was twenty-six passengers, of whom fourteen sat outside. Even with the advent of the motorbus, height and weight prevented placing a roof over the upper deck until a change in rear axle design allowed a significant lowering of the chassis height in the late 1920s.
Taxation of the horse-bus business continued, but the large numbers of vehicles and operators meant that the Treasury was earning more than anticipated. The government duty was reduced from 1½ d a mile to 1d by an act of July 1855, and from 1d to ¼ d in July 1866. By this time, taxation of railway travel had already begun, dating from 1832, when railway companies were made to pay what was then the not insubstantial duty of ½ d (0.4p) per mile for every four passengers carried, and the relative significance of the railways compared to stagecoach travel at this time can be judged by the fact that in 1835-37 the Treasury collected £13,000 annually from the railways against £750,000 (worth about £42 million today) from the stagecoach operators. As duties go, this ‘passenger tax’, as it became known, was a clumsy instrument since it made no distinction between the class of passenger, and so bore more heavily on the poorer travellers than the more affluent travelling in second or first class. It was not until 1844 that the first attempt was made to ease this situation. Duties on horse-drawn public transport were not removed until 1869, by which time the number of stagecoaches as opposed to horse buses had dwindled considerably. Proprietors paid the duty once a month at the Inland Revenue offices, in gold coins.
The stagecoach duties were abolished in 1869, and the following year responsibility for horse buses was passed to the Metropolitan Police under the Metropolitan Public Carriage Act. This also removed an earlier anomaly that had allowed the City of London its own jurisdiction over public transport within the ‘Square Mile’. The first horse buses could draw across to the other side of the street to pick up a passenger, but the Metropolitan Streets Act 1867 required buses to stop on the nearside of the road, although this stricture initially only applied to a radius of four miles from Charing Cross, increased to six miles in 1885. This seemingly simple change was to have a profound effect on the design of buses as from this time onwards it was only necessary to provide access on one side of the vehicle. The rear entrance had been a restriction on bus design that allowed passengers to board or alight on either side of the vehicle.
By this time, a competitor to the horse bus had arrived in the form of the tram. This was altogether smoother and the reduced friction from running on a rail also meant that the horses could handle a heavier load. The early trams had stronger and less elegant structures than the horse buses, with inclined staircases on the earliest versions, although a half-spiral became the standard later, so that more passengers had the confidence to travel ‘outside’. The half-spiral staircases were not adopted by the horse buses until later, but the trams also brought brakes, and that feature was finally adopted by horse-bus proprietors, although some of this may also have been due to the fact that the Metropolitan Police had made a clean sweep of horse buses in 1870, just as soon as the new legislation allowed, and many vehicles were put off the road, some of them for good. The introduction of brakes was not only a safety feature; it also took the burden of stopping away from the horses and transferred it to the vehicle: a considerable improvement as far as the horses were concerned.
Once a rear staircase rather than a ladder was provided, women started to travel outside. To make the move from inside to outside respectable, ‘decency boards’ were put along the outer sides of the upper deck so that Victorian men would not be aroused by the sight of a feminine ankle – and before long these decency boards were paying their way, carrying advertisements. The closing decades of the century also saw a sharp fall in fares, making bus travel more popular, and no doubt the advertising revenue was very welcome.
The cycle of boom and bust applied as much to the busmen as it did to their counterparts on the railways. In part it was also a case of supply outstripping demand, a situation aggravated by the growth of the tramway networks. By 1890, there were 2,210 horse-drawn buses on London’s roads, and of these, about 5 per cent each year were condemned by the Metropolitan Police as unsafe; usually the older vehicles. This period also saw the appearance of a large number of single-deck one-horse buses operating short routes, such as Hampstead Road to Oxford Circus. These had first appeared during the Golden Jubilee of 1887, charging a flat 1d fare to attract passengers, and later this was dropped to ½ d. To cut costs, these buses did not have a conductor and the fare was dropped into a glass box by the driver. These became known as ‘ha’penny bumpers’. By 1901, there were no less than 3,736 horse buses licensed to operate in London. While there were a few large forty-eight-seat buses, painted dark green and drawn by three horses and carrying the fleet name of ‘Favorites’ (sic), these were not allowed in the City after 10 am because of their size. By the turn of the century, while the horse-drawn buses were still generally two-horse and carrying twenty-six passengers, forward-facing garden seats became standard on the upper deck, while brakes were also standard as was a curved staircase. White lights were carried on the offside front under a London County Council Order, improving safety and recognition of a bus as it approached at night. Standing passengers were not allowed, largely because of weight problems, but the vehicle itself was an outstanding example of the coachbuilder’s art, not least because so much of the structure was of glass and yet the upper deck bore the weight of fourteen passengers and the driver.
The bus was a mode of transport for the middle classes. To cater for the needs of city workers, four-horse express buses, but still with twenty-six seats, plied the main routes between the suburbs and the city, usually with regular travellers, and some of the bus drivers became well known for their knowledge of the stock market, and their ‘tips’ were often sought. The bus was light and strong, and it had to be, for it was not pulled by heavy horses such as Shires or Suffolk Punches.
The London bus scene was chaotic, but colourful. London buses weren’t ‘always red’. The green ‘City Paragon’ ran between the City and Streatham, costing just 5d; the dark green ‘John Bull’ ran between Liverpool Street and Lancaster Road, every three minutes, again for 5d; a white bus, whose fleet name seems to have been lost, ran between Liverpool Street and Putney every three minutes for 6d; while others were painted dark brown. These were commuter services, but the peak periods were much longer than today, and most people worked at least a half day on Saturdays. Even running across the centre of London between Charing Cross and Baker Street cost just a penny, less than half today’s ‘new’ penny.
Speculation and the railways
There can be little doubt that many of the tips gleaned from one passenger and then dispensed to others later by the horse-bus drivers concerned the railways. The railways were not just the hot share of the day, they were exceptionally important until the outbreak of the First World War. Today people associate the railways with decline, loss and subsidy, but until 1914 there were many companies that were very profitable. During the nineteenth century, inflation varied but was low by the standards of post-Second World War Britain, and interest rates were low as well. A dividend of 3 per cent was worthwhile when the Post Office paid 2½ per cent. Indeed, one reason why the country could afford to build the railways was the low interest rates charged or expected, and, of course, the low price of agricultural land, plus cheap labour, much of it imported from famine-stricken Ireland. Building and operating a railway was far less capital intensive than today.
The railways were a shock to the national financial system. Their immediate predecessor, the canals, had a total share capital between them of £20 million, but in the first stage of the railway age, between 1820 and 1844, the railways required more than £40 million, and in another six years, in 1850, their total share capital amounted to £187 million. The railways did not simply create employment by being built and operated, they created employment that was not obviously connected with the railways, being the single most important factor in the creation of the stock market. The London Stock Exchange was revolutionised. The stock market required more than just stockbrokers, for at the time there were also people known as stock jobbers, who effectively acted as wholesalers of shares, and then of course there were the backroom people, the clerks, struggling to keep track of the business transacted, the solicitors and bankers, all of whose involvement was necessary.
THE RAILWAY KING:
George Hudson, 1800-1893
George Hudson was born in 1800 in the small Yorkshire village of Howsham. He moved to York, working in a draper’s shop, marrying the owner’s daughter and later, in 1827, received the then considerable inheritance of £30,000 (about £1.38 million today), from a distant relative. He was later to maintain that the inheritance was the worst thing that ever happened to him, but it enabled him to become active in local politics, becoming Mayor of York three times, and also to invest in local railway schemes. In 1836, he was elected chairman of the York & North Midland Railway, linking his adopted city with London, albeit by a circuitous route via Derby and Rugby, taking 217 miles, but offering four through trains a day, with the journey from York to London taking ten hours as against around twenty hours by stage coach. The company leased and then later absorbed adjoining lines, as well as building a number of extensions itself. Hudson pressed for a major trunk route up the East Coast to Scotland, but the line being built by the North of England Railway from York to Newcastle was in difficulties and, by 1841, it had exhausted its capital, but still had only managed to reach as far north as Darlington. Hudson was dismayed by this situation, as not only was his vision of a line to Newcastle and beyond compromised, but the Board of Trade had finally started to take an interest in creating strategic routes, and wanting to link London with Scotland, had opted for a route from Carlisle to Edinburgh using a competing route that had already reached as far north as Lancaster. It was left to Hudson to bring the various assorted railway interests involved together.
Believing that the finance needed was unlikely to be raised on the open market, Hudson suggested that each of the companies present should offer shares in the proposed line to their own shareholders, with a guaranteed dividend of 6 per cent. A new company was formed, the Newcastle & Darlington Junction Railway, with Hudson as chairman. It was not until 1842 that the necessary legislation was passed through Parliament, undoubtedly a factor in Hudson deciding to become an MP.
Meanwhile, the YNMR had been doing well, paying a ten per cent dividend at a time of recession, but the North Midland, over which much of its traffic proceeded, was suffering. Hudson headed a committee enquiring into the affairs of this company, and within a week proposed a dramatic reduction in expenses, cutting these from £44,000 weekly to £27,000. This decisive action saved the company, but its neighbours, the Midland Counties and the Birmingham & Derby Junction, were also suffering difficulties. With remarkable clarity of purpose, Hudson proposed a merger of all three companies, one that would achieve still further savings, with the new Midland Railway formed in September 1843.
Hudson forecast that the railway bubble was about to burst and that many of the new and proposed lines would turn out to be unviable, but staunchly maintaining that ‘…the public would rather (the railways) be in the hands of companies than…government’. Hudson was asked by the directors of the other railway companies to head resistance to Gladstone’s Bill, and so it was that when the Parliamentary process was complete, the Railway Act 1844 saw most of the troublesome and unwelcome clauses of the original bill omitted.
On 18 June 1844, the thirty-nine miles of the Newcastle & Darlington Junction Railway opened. The railway journey from York to London had taken ten hours in 1837, but by 1844 the much longer journey from Gateshead to London took just eight hours, a clear indication of progress. Hudson became Conservative MP for Sunderland in 1845, largely because his railway ambitions could be helped by a seat in the House of Commons. While he did much to improve the town’s docks, he was also driven by a desire to sabotage the plans for a direct line between York and London, which later became the Great Northern Railway, and in 1846 this drew him into taking over the Eastern Counties Railway. Hudson won over the ECR shareholders by trebling dividends and it soon became clear that he was paying dividends out of capital: unacceptable but a fairly commonplace practice at the time. This raised questions amongst those concerned with his other companies, and it was soon found that the same practice was being applied, so that by the end of 1849, he was forced to resign all of his chairmanships. By this time, the Great Northern route was open and, pragmatic to the end, Hudson decided to use the new route and abandoned his own plans to extend the Eastern Counties line, with the result that, simultaneously, Hudson was under pressure from angry Midland Railway shareholders who objected to the diversion of traffic away from their route and on to the more direct route.
Had the railway boom continued, Hudson could have avoided the problems that beset him over paying dividends out of capital. It was not to be. Claim after claim was lodged against Hudson, who continued to the end to attract warm local support in both Sunderland and Whitby, as the inhabitants of both towns saw him as a local benefactor. Initially, Hudson was able to fight off the threat of bankruptcy by selling his extensive estates, which he had acquired to leave to his sons, and afterwards because as a sitting MP he could not be arrested for bankruptcy. When he lost his parliamentary seat, he was forced to flee to France, and spent many years in and out of exile.
Yet, one did not need reminding that shares can go down in value as well as up. The performance of any particular railway could have a profound effect on its shares, so when serious deficiencies were found in the accounts of the North British, in 1866, the value of its shares plummeted. The outbreak of the Franco-Prussian War in 1870 also forced share prices down.
One of the problems was that obtaining parliamentary authority to build a new railway took a considerable time, and often a substantial financial outlay. Construction was slow, and although companies operating over any real distance would attempt to open the line and start operations in stages to get some revenue, there was a delay before a railway started to pay worthwhile dividends to its shareholders. This was not quite as bad as it seemed, since, in such circumstances, not all of the money had to be raised immediately, and some shareholders were able to provide just 10 or 15 per cent of their overall investment at the outset. On the other hand, there was a clear temptation to cut corners in construction, and a clear incentive to resort to unscrupulous tactics such as paying dividends out of capital invested simply to keep the early shareholders happy.
The story of no one man quite encapsulates the roller coaster ride that was the lot of the early railway entrepreneur better than that of George Hudson, who, at the peak of his powers, was the chairman of four railway companies. By 1850, he controlled a quarter of the nation’s railway route mileage, then over 6,000 miles, itself probably equalling the total route mileage in the rest of the world at the time. It was Hudson who brought together several railway companies to create the Midland Railway, which, after using King’s Cross for a while as its London terminus, eventually built its own at St Pancras, but that was to be after his fall from grace in 1849.
Hudson’s departure coincided with an end to the railway bubble. Such feverish speculation and the desire to build railways meant that the industry was over-capitalised. Far too many lines with modest prospects were built and, contrary to popular opinion, not all of these survived long enough to be recommended for closure by Beeching. As the century progressed, lines were built as extensions by existing companies.
Nevertheless, railway speculation continued and developing a railway remained a high-risk activity, both for the investor and for those responsible for the project who could suddenly find that support faded away. The 1850s had seen further problems, but it was not until 1866 that a major financial crisis ensured, with the collapse of the bankers, Overend Gurney, which was already over-extended and was brought down finally by its exposure to the Mid Wales Railway, a contractor’s line. Overend Gurney failed on 10 May 1866 with liabilities of more than £18 million.
Fallout from this banking collapse hit London and the South East of England hard, with one of the casualties being the London, Chatham & Dover Railway, which served both Farringdon and Victoria Stations in London, and which was forced into receivership from which it did not emerge until 1871. The LCDR was itself already impoverished, having been brought about by the resentment of interests in the north of Kent at the southerly route of the South Eastern Railway, which ran from Charing Cross and Cannon Street and which avoided the Medway towns, including Chatham and Rochester. Much of the work on the LCDR was being undertaken by contractors in return for an interest in the company and it was vulnerable to a banking collapse.
The financial system of the day lacked the sophistication with which to deal with a major banking failure and the Bank of England, itself in private ownership, lacked the means for a rescue. Exposing the vulnerability of a significant bank in itself did little to endear railway investment to the many shareholders. Interest in railway shares eventually recovered, and over the half century that followed, no doubt many were pleased that they had remained loyal to the railways. On the other hand, at difficult times they had little choice other than to sell their shares at a considerable loss.