Lecture 3 – Textile Industry

Background:
 The peak of the textile industry was in the eve of the first WW, 1913:
o Britain pioneered mechanisation of textiles in the cotton industry
o Concentrated in Lancashire
o Main areas: Liverpool, Manchester, Oldham, Bolton, Blackburn, Burnley and Preston
o First agglomeration economy

 Interwar decline:
o Great depression and decline in trade hit Lancashire hard.
o 1933: Japan overtakes Britain as the world’s leading cotton exporter.  Difficult to
hold a productivity advantage against lower wage countries.
o Cotton remains Britain’s most important export until 1939, a position it had held for
125 years.

 1945 (aftermath of WWII) (slight improvement):

o Britain barters Lancashire cotton for Canadian wheat as it lacks foreign exchange.
o Following advice of Keynes, post-war Attlee government sets up a commission to
assess the industry – they see a good future for Lancashire.
 Clement Attlee served as Britain's Prime Minister from 1945 to 1951.
o Cotton seen as major part of solution to balance of payments problem.

 1950 onwards (relentless decline):

o Britain becomes a net importer of cotton goods in 1959.
o A textile mill closed, on average, almost every day of the week from 1960 to 1980.
Understanding success of the Textile
industry:

The success of the textile industry was fundamentally because of the very high productivity which
outweighed the effect of high wages.

 Productivity was high because of the agglomeration benefits:

o Specialisation.
o Vertically specialist spinners and weavers, few integrated firms.
o Low minimum efficient scale.
o Many market participants.
o Highly competitive – small “tail” of underperforming firms.

 Lancashire was one of the first agglomerations, % of Lancashire productivity (wages) (Board
of Trade 1909):
o Yorkshire – 91%
o Other England & Wales – 67%
o Scotland – 71%
Understanding decline – was it
inevitable?
 Were there options to avoid decline? Americanisation:
o In the 1940s, Frank Platt, head of the Lancashire Cotton Corporation, argues UK
should adopt US practices.
o US approach included:
 Larger factories
 Modern machinery
 Longer print runs – printing in sufficiently high volumes to ensure that the
cost of each unit is as low as possible.
 Vertical integration – Vertical integration is a strategy whereby a company
owns or controls its suppliers, distributors or retail locations to control its
value or supply chain.
o The UK government acted on Frank Platts advice and offered £12 million in subsidies
as part of the 1948 Cotton Spinning Re-equipment Subsidy Act. However, only £2.6
million was claimed.
o Americanisation would’ve been unsuccessful/was unsuccessful:
 The UK market is much smaller and less protected & so it wouldn’t be
appropriate to follow the same model.
 Evidence that vertically integrated British firms were actually less profitable
than smaller specialised firms.
 American textile industry also disappeared in post WWII period.

 Were there options to avoid decline? Protectionism:

o Due to geopolitical reasons, protectionism wasn’t appropriate: UK could hardly ban
cotton from India after India’s assistance in WWII.
o Many in Lancashire also believed in free trade.

 Were there options to avoid decline? Nationalisation:

o Unions wanted a variant of the Platt scheme with state ownership
o However, despite significant nationalisation of industry in the post-WWII period,
there was never any movement to nationalise cotton

 Were there options to avoid decline? The Italian option:

o The Italian industry focused on higher end fabrics and styles. More focused for
higher income customers.  Firms such as Benetton emerged as leading players in
this segment.
o Italian industry declined more slowly, but declined, nonetheless.
o Design does not necessarily lead to local manufacturing.
 Were there options to avoid decline? Invention:
o Rayon:
 Semi-synthetic textile.
 Can be made into easy care fabrics and processed using cotton machinery.
 Invented in Britain in 1900.
o Polyester:
 Also, synthetic fabric.
 As popular as cotton, either on its own, or blended.
 Invented in Britain in 1940.
o Invention does not lead to local manufacturing:
 Lower cost producers still take market share.
 China now makes more than 50% of the world’s polyester.

 Were there options to avoid decline? Specialisation:

o High performance textiles such as airbags and parachutes are still produced in high
wage countries (because of the quality control standards which are more important
than the cost of productions), but this is not a large market.

 The aforementioned factors (Americanisation, protectionism, nationalisation, the Italian

option, invention, specialisation) wouldn’t have saved the textile industry.

 Alternative view: The textile industry decline was inevitable, and most jobs were difficult.
The government should have given subsidies for closure, re-training and relocation instead.
Summary/Conclusion:
 Summary:
o Textiles were a success story for Britain.
o Leading export for 125 years.
o World leader in production and productivity despite being a high wage nation.
o First agglomeration economy.
o Decline in 20th century was steep and irreversible.

Conclusion:

 Unlike some other industries, the decline of textiles does not appear to have been impacted
by:
o Poor government policy.
o Labour disputes.
o Lack of finance.
o Education and training deficiencies.
o Delayed entry into EEC.

 The industry does share characteristics with other industries:

o Standardised products and machinery.
o Mass production techniques.
o Low capital intensity.
o Easily transportable raw material.
o Unit cost is the most important factor.
o And UK could ultimately not compete with lower wage economies in 20th century