.,,,olluiliE

An unknown 'Duchess' ascends BeattockBank with the pre-war 'Coranation Scot'.The 1930s stresmliners are often cited(erroneously) as examples of inter-railcompetition. The truth was that these trainswere largely runfor prestige reasons andthey served a relatively small and exclusiveclientele. In any case, by 1938 poolingagreements between the Jbur large groupshad effectively eliminated any meaningfulcompetition. (Lens of Sutton)

IntroductionThe Grouping era (1923-38) representedthe final stage in private enterprise rail-roading in the UK. Although the systemlingered on until 1948 before finally pass-ing into public ownership, this event wasmerely a formality (as the railways hadbeen under direct state control since 1939).

Now that British Rail is being brokenup and sold off, it is probably an opportunemoment to turn the clock back and see howthe individual groups lared in the yearsleading up to nationalization.

So just how profitable were the rail-ways under private ownership? How muchcompetition really existed between them?Which companies were the most success-ful? What were the most lucrative traffics?How much was lost to road transport com-petition? And, perhaps most impoftantly ofall, did the 1923 Grouping scheme work inpractice?

These are questions which are oftenraised but seldom answered satisfactorily.Whilst volumes have been written aboutthe exploits of famous engineers, locomo-tives and train services, &c, the impofianteconomic aspects of actually running thesystem have largely gone unnoticed, whichis a pity, because this neglected subject isequally worthy of attention.

THD GBOT]PINGA Oompnrntive Study ofthe Bailwnys in Orisis

BY JOHN W. E. HNIU

The following comparative study tracksthe fluctuating fortunes of the industrybetween 7923 and 1938. It falls into threemain sections: The first gives a generaloverview of the inter-war environment inwhich the companies had to operate. Thesecond looks at the individual traffic cate-gories in some detail, whilst the thirdexamines the financial performance of thefour main groups.

The Inter-War YearsThe inter-war years marked an impofianttransitional stage in British railway history.The railways were still the dominant modefor inland transport, but they no longerenjoyed the monopoly they held before1914. By 1938 road transport had madeserious inroads into both the passenger andfreight traffics.

There is still a tendency to look backnostalgically upon this period as the gold-

en age ofrail travel. The true picture, how-ever, was rather different. Even in thosesupposedly halcyon days, the railways hadbeen forced back onto the defensive andthe first signs of decline were beginning toemerge. Falling traffic levels and decliningprofitability are nothing new; they did notsuddenly materialise in the 1950s and '60sas the inevitable consequences of war andnationalization. On the contrary, thesesymptoms were already evident in the1920s and '30s when the railways werestill under private ownership.

Basically, the inter-war period itself fellinto three clearly-defined periods: (1) thebooming twenties 1923-30 (which alsoincluded the 1926 General Strike), (2) therecession years 1930-33 and (3) the grad-ual recovery 1933-38. After bottoming outit 1932/33, traffic receipts grew slowlyand steadily to reach a new, though lower,peak in 1937 (but slipped back sharply inthe following year).

16 BACK TRACK

PART I - THB GNUBNAT BACKGROUND

IYDABS l9z3-I93a)This up, down and slightly up again

pattern is a recurring feature of most,though not all, traffic flows during thisperiod. (See Graph 1). The 1920s levelscould not be recaptured in the thirties basi-cally for two reasons the depressed stateof the economy and the rapid rise in roadtransport.

A number offactors should be borne inmind when analysing the following trafficresults. Firstly, the fortunes of the railwayslargely depended upon the prevailing stateof the economy. When times were good,

Total traffic receipts,l 923-1 938

1923 1926 1929 1932 1935 1938

traffic flourished; but when the recessioncame they were the first to suffer. Regionalconsiderations have to be taken intoaccount. The more prosperous south, forinstance, fared much better than the not soprosperous north (which bore the brunt ofthe industrial recession). AIso, the differentgroups had different traffic combinations.The LMS, LNER and GWR, for example,were predominantly freight carriers whilstthe SR was basically a passenger railway.

The inter-war years also saw changes inthe relationship between the railways andthe state. The Grouping produced one sideeffect that often tends to get overlooked -it drastically curlailed the railway interestin Parliament. In the nineteenth century,railway directors sat in both Houses andveered strongly towards the Conservativeand Unionist camp in terms of politicalallegiance. They wielded considerableinfluence, but their power waned after the1906 election. By 1921 Parliamentary rep-resentation was down to 32 MPs in theHouse of Commons and 48 peers in theHouse ofLords. But Grouping broughtabout decimation. By 1925, a rump of just7 MPs and 23 peers of the realm was allthat was left. This meant that the industryexerted far less political clout than hitherto

- it got fewer favours from those in high

places.

The Main ContendersThe LMS was by far the largest companyand accounted for around 40% of the total'Big Four' traffic turnover (nearly as much

The streamliners and the named trainstended to hog the limelight, whereas thesecondary semices got less attentian andreceived far less publicity, All too often theyhad to make do with 'hand-me-down'rolling stock cascaded from moreprestigious workings. Depicted here, anageing 'George the Fifth'prepares to leaveMaruchester London Road with a localtrain, (The support masts.in the backgroundformed part of the joint LMS/LNEelectrification MSJA venture of 1931).(Lens of Sutton)

as the LNER and GWR combined, in fact).Unlike the LNER, the LMS was a highly-centralised organisation which adopted apolicy of rigid standardisation.Unfortunately the group was consumedwith festering LNWR versus Midlandrivalries andjealousies which tore it apartduring the early formative period.Consequently, it took many years beforethese intemecine conflicts could be proper-ly resolved.

The LNER was the least profitable ofthe groups and served the mostunfavourable area. It was the hardest hit bythe inter-war recession which flattened theold heavy industries of the North East iecoal, iron, steel and ship building. It alsoflattened LNER finances which is partlywhy the company could not afford toimplement LMS-style 'scrap and build'standardisation programmes

- it had to

get by largely on 'make do and mend' phi-losophy instead. The company structurealso differed substantially from that of theLMS. It was far less centralised anddevolved on three main areas

- the

Southern (basically the former GNR, GCRand GER), North Eastern (NER and HulI& Barnsley) and Scottish (NBR andGNSR).

BACK TRACK 17

*.-""%

,Iil]ilililIilllE

The GWR had fewer problems thaneither the LMS or LNER. To stafi with, ithad the best track record by far for theimportant merchandise traffic which put itin a financially healthier position. It alsoenjoyed one advantage not shared by theother groups, namely it was the only onenot to have lost its identity after the 1923Grouping. This provided for continuity andsaved the company from the internal dis-sensions noted elsewhere. In fact. the'amalgamation' was little more than aGWR takeover of the other railways, ratherthan a merger in the true sense of the word.(The disparity in size between the oldGWR and the other group constituentsmade this inevitable).W ith such control itwas a relatively easy matter for the compa-ny to impose the high level of standardisa-tion already attained upon the other rail-ways in the new or 'Greater GWR'.Clearly, it was very much a case of'Swindon rules OK. . .'.

The SR was the most profitable andprogressive group. But it was the odd manout

- the bulk of its revenues came from

passengers, not freight. Electrificationproved to be the salvation of the Southem.Whilst the commuter traffics of the othergroups continued to shrink with monoto-nous predictability, the new SR electrictrains. completely reversed this downwardtrend and even broke new records for pas-sengerjourneys and receipts. In addition tocarrying commuters in the wealthiest partofthe country however, the SR alsocatered for the important Continental boattrain traffic. The company had the lion'sshare of this once-lucrative traffic.

As well as running railways, all four

groups owned numerous ancillary under-takings. Most of these represented anextension of normal services by non-railmeans. The most important were shippingand docks. Some were no-hopers and usu-ally unprofitable eg the railway-ownedcanals. Other activities were invariableloss-makers

- like the collection and

delivery freight and parcels services -

butwere presumably tolerated and cross-sub-sidised by managements to retain traffic.The hotels were more profitable and pro-vided an important source of income. So,too. were the takings from the associatedbus fleets, though few ofthese remainedunder direct railway control by the late1930s.

A11 these ancillary undertakings comple-mented the mainstream railway business.However, their contribution was relatively '

small when compared with the railwayactivities as a whole. Receipts from railwaytraffic alone accounted for about 9O% oftotal gross receipts in 1923 and the propor-tion by 1938 was only marginally less.

CompetitionThe elimination of (inter-railway) competi-tion had been a key Government objectiveand the primary justification for the 1921Railways Act. However, this was neverfully realised as competition continued toflourish (albeit in a reduced forn). As theeminent railway economist, Acworth, per-ceptively noted at the time, " the effect ofthe new statutory grouping is to leave thebulk of the territory of Great Britain non-competitive, but the bulk of the traffic stillcompetitive".

This was especially true of the trafficsbetween London and the other major cen-tres of industry and population.

Had the Government seriously intendedto eliminate competition altogether, farmore radical surgery would have been nec-essary. Company boundaries would haveneeded to have been redrawn and trafficsre-allocated accordingly. The Grouping didnothing to tidy up the situation regardingthe joint companies which required sepa-rate administrations and accounts, &c.There were still over 30 of these anom-alous institutions around when the railwaysfinally passed into public ownership int948.

Then there was the question of the'penetrating 'lines'. At one stage it wasenvisaged that they would have been trans-ferred between the groups to form morerationally-stnrctured regions. But this nevercame about, so, for example, the WestHighland line (which penetrated LMS ter-ritory) remained under LNER ownership,whilst the London, Tilbury & Southend(which penetrated LNER territory) stayedfirmly in the LMS fold.

Inter-railway competition was probablymore apparent than real, anyway. What

The LNER had a publicity departmentsecond to none. With famous engines likeMallard, Flying Scotsman, Green Anow and.Cock o' the North (pictured here), it caughtthe populnr imagination in a way that noneofthe other groups ever did. Unfortunately,this also projected an illusory image ofcorporate strength which the company(being financially the weakest) never reallyhad. (Lens of Sutton)

1B BACK TRACK

particularly stands out about the privately-run system was not the extent of competi-tion as such, but rather the great lengthsthe companies resorted to in order to avoidit as far as possible. The 'gentleman'sagreement' which ended the celebrated'Race to Aberdeen' in 1895, for example,lasted until 1928

- more than a quarter of

a century. The blunt fact was that the rail-ways were in no hurry to speed up theirservices. Similarly, on the freight side, thewidespread use of rate conferences andpooling agreements further narrowed thescope for competition. (There was no 'fairtrading' or anti-monopoly legislation inthose days to prevent the companies fromacting in this way).

Where competition did exist, it wasmore likely to be confined to the provisionof services rather than take the full-blowneconomic form (ie did not extend to cut-ting rates or fares). Certainly, the type ofcompetition which now exists in the priva-tised bus industry (for example) was large-ly absent. Here the name of the gameappears to be not just to steal the custom ofyour rival, but to put him out of businessas wel1. Competition between the railways,by contrast, was a far more restrained andgenteel affair and could hardly bedescribed as being a life or death struggle.Besides, this'beggar-my-neighbour' phi-losophy was largely alien to the railwaymanagements of the day. It was alsoagainst the spirit of the age which favouredmonopoly. regulation and co-operation.

By the 1930s, inter-railway competitionhad virtually disappeared. In 1932,tbeMinistry of Transport sanctioned threepooling agreements between: (l) the LMSand LNER, (2) rhe LMS, LNER and GWRand (3) the LMS and GWR. These coveredall competitive passenger and freight(though not mail) traffics. A combinedLMS, LNER, GWR and SR parcels poolfollowed in 1934. The GWR and SR alsopooled competitive passenger receipts forall traffic west ol Exeter.

These agreements were defended on thegrounds that they would produceeconomies. By combining rival trafficflows over certain routes, it was hoped thatunnecessary train mileage could be elimi-nated; likewise terminals could also becombined where this was found to be con-venient. Duplicate capital expenditurecould be avoided and savings were expect-ed from reducing advertisement, canvass-ing staff and other administration expenses(though whether any of these theoreticalbenefits were actually realised is, ofcourse, another matter altogether).

No doubt the streamlined services ofthe LMS and LNER will be cited as evi-dence of continuing inter-railway competi-tion. However, these trains were basicallyrun for prestige reasons and catered for avery exclusive clientele. They accountedfor a minute fraction of total passengerjourneys and were probably ofdubiouseconomic value to the companies con-cerned.

Competition between the railways wasvirtually dead by 1938, but that providedby road transport was very much alive andit posed a far greater threat to the survivalof the industry. This pafiicular issue will beaddressed in lhe next section.

Road TransportRoad transport was not perceived to be athreat to rail in the early years. Motor vehi-cles were seen more as providing a com-

plementary service -

ie filling in the gapsof the rail network

- rather than as a

potential competitor. Indeed, many earlybus routes were pioneered by the railwaycompanies to serve this very purpose.

But the rise of the motor industry wasmeteoric. In 1903, there were only 18,000registered motor vehicles (of all types) inthe UK. Within twenty years this had rock-eted to over one million and was growingat an alaming rate. By 1928

- within just

five years - the total had doubled again

and passed the two million mark for thefirst time. The statistics in the table abovetell their own story.

Although these figures may be smallbeer when compared with modern-day traf-fic levels, they were still large enough toconsiderably dent railway finances.

The railway companies did not initiallyfear mechanised road transport becauseearly vehicles were unreliable. Roads wereoften little better than dirt tracks whichwere usually impassable during the wintermonths. Road motors were ideal for carry-ing small loads for shorl distances, but itwas never seriously thought at the time thatthey would ever make large scale inroadsinto rail traffic.

However, between 1919 and 1939, thetechnical improvements to both roads andvehicles increased by leaps and bounds,whereas rail technology proceeded at amore leisurely (some would say pedestri-an) pace.

In the beginning, road transport waslargely unregulated and not subjected tothe same stringent statutory obligationsunder which the railways had to operate.By law, the railways were still required to:

(1) Publish their fares and charges(2) Cany all goods offered to them(common carrier status)(3) Afford 'reasonable facilities'(4) Provide facilities for through traffic(5) Show no undue preference(6) Provide facilities for workmen andthe armed forces at reduced rates(7) Submit to statutory regulation ofwages and ryorking conditions(8) Present retums and accounts to theGovernment in a prescribed manner.

Road hauliers and bus companies were nothandicapped in this fashion. Indeed, untilthe passing of the 1930 Road Traffic Act(which set up Road Service and PSVlicensing in the bus industry) and the 1933Road & Rail Traffic Act (which likewiseintroduced a system of carrier's licensinginto road haulage), road transport went vir-tually unregulated. Operators could runservices whenever, wherever and howeverthey liked and charged whatever they couldget away with.

This constituted a form of unfair com-petition for the railways and led to a seri-ous abstraction of revenue. Road haulagecharges were determined by the cost of

providing the service (unlike railwaycharges which were still based on the anti-quated notion of the value of the goodstransported). Also, the railways had tomeet the full cost of providing their ownpermanent way, track and signalling, &c.Road operators, however, shared a com-mon highway and only partially coveredtheir true costs through the vehicle taxationsyslem.

Both the 1930 and 1933 Acts affordedsome measure of protection for the rail-ways (this, in fact, had been the intentionof the legislation). However, the 1933 Actwas only parlially effective. Whilst thenumber of 'A' licence holders (ie profes-sional road hauliers operating for hire andreward) was strictly curlailed, the 'C'licences (for own account operators) werefreely available. Consequently these fleetscontinued to expand and this proved to bea major flaw in the Act.

The 1933 Road & Rail Traffic Act hadalso introduced a bit more flexibility intothe charging system by allowing the com-panies to make 'agreed charges'. Thisenabled contracts to be negotiated on anindividual basis with traders (the generalrule in road haulage) and it also freed thecompanies from the statutory obligations:(a) to grant equal charges to all and (b) toshow no undue preference. However, thesecharges still required the consent of theRailway Rates Tribunal and were onlysanctioned in cases where exceptional (ienon-standard) rates would otherwise not begranted. By 1939, over 850 agreed chargeshad been approved and these represented agross turnover of some !4 million.

It has been estimated that road haulageoperating costs fell by at least one thirdduring the inter-war period. This declinewas largely achieved through technicalinnovation and greater efficiency. Basicwage rates in both the road haulage andbus industries were much lower than thosefor comparable railway positions - wagesand working conditions were heavilyunionised and protected by law, whereasroad transport workers were not. As labourcosts represented a high proportion of totalcosts. this was just one more compelitivedisadvantage under which the railways hadto operate.

In 1938, the four groups united tolaunch the'square deal' campaign. Thiswas aimed at removing the onerous statu-tory conditions imposed on the industry.The main thrust of the argument was thatthese obligations were no longer necessarybecause the railways had ceased to be amonopoly. Removal would have enabledthem to compete with road transpofi on amore equitable basis. After initial hostility,the Government finally conceded the pointin principle, but alas, war intervened beforeany steps could be taken to remedy the sit-uation.

(to be continued)

BACK TRACK 19

The Rapid Rise of Road Transport to 1939: Number of Registered Vehicles (000s)

PrivateCars &Vans

PublicTransportVehicles

GoodsVehicles

OtherVehicles I otal

,8288768536

464

101348488

53975

10190

1 9041 913192019301939

a

106't 87

1,0562,034

18306650

2,27 43,149

{ Public Transpori Vehictes irrcludes buses, caaches, taxis, but excludes tramcars)