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UBC Theses and Dissertations

The development of banking institutions in Manchester, 1770-1850 Jones, Frank Stuart

Abstract

The purpose of this thesis is to show how the banking houses of Manchester emerged in response to the needs of the cotton industry. Because banking functions and theory have, tended to be studied in isolation from the socio-economic conditions that gave rise to them, this has not always seemed obvious. However, this has now changed and a theoretical framework exists that conceptualises banking as one of the lateral linkages resulting from industrial growth. To the Manchester bankers of the eighteenth and early nineteenth century, this would come as no surprise; to them it was self-evident. This study falls into three sections. In the first of these, after the nature of the problem has been outlined, there is an analysis of the interactions between the growth of the cotton industry and the development of banking houses and an analysis of the changing financial needs of the cotton industry between 1770 and 1850. The second section inquires into the backgrounds of the men who owned the private banks and the men who controlled the joint stock banks. In the third section, an examination of the business of the banks looks at their resources, their investments, their relations with the London money market and their relations with the Bank of England. The conclusions derived from the study confirm the validity of the propositions that banking functions were determined by the requirements of the cotton industry and that the main financial requirements of the cotton industry were for remittance services and working capital. Ownership of the banks by cotton entrepreneurs was not necessary in order to ensure the provision of these services. Indeed the banks did not pass into the ownership of cotton merchants and manufacturers until the development of the joint stock banks in the second quarter of the nineteenth century. Nor did the cotton merchants and manufacturers who took control of the joint stock banks in the 1830*s effect any permanent radical changes in banking functions. They took control, not in order to channel funds into their own businesses, but in order to ensure the continuance of the traditional banking practices developed by the private bankers over the previous half century. Remittance facilities, short-term loans for working capital and an acceptable medium of exchange were what the cotton industry required in the industrial revolution. In the period 1770-1850, as banks evolved to make these available, Manchester experienced a financial revolution, the scale and intensity of which was just as great as that taking place in cotton manufacturing.

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