But
fragmentation within the railway industry isn't a new issue and was addressed by railway managers in the early 1900s. In the late 1890s the
railway industry's profits were depressed by a mix of poor management, competition,
increasing material costs and the growth of high volume low-margin traffic
(However, historians are divided on which of these factors played the biggest
role). Indeed, in 1885 the industry's operating ratio, which is expenditure
expressed as a proportion of revenue, stood at fifty-two per cent. By 1900
this had been driven up to sixty-two per cent.[2]
In response to their change in fortunes, railway companies attempted to reduce costs through numerous
means in the first years of the 1900s; more efficient track maintenance,
better locomotive designs, new technologies and improved goods operation. Yet,
despite these vigorous efforts to improve how they functioned,
inter-company rivalry and duplicated services remained one of the most serious and
costly issues for industry leaders. Between 1870 and 1900 the railway companies of
Britain, of which there over a hundred, unsuccessfully sunk resources and capital into competing for market
share on certain routes and at cities which were served by more than one company. For Example, the Great Western and London and South Western Railways had a protracted battle in the West of England, both in terms of the services they provided and through line building to gain territory. But such competition only served to depress profits, not
improve them.
Therefore, late
in the first decade of the twentieth century railway companies came together to
promote economical working, eliminate competition, pool resources and
ultimately reduce overheads. While outright mergers were actively resisted by
government, as they would hand companies regional monopolies, railway directors and managers
worked around this objection by forming 'working unions'. In late 1907 the
Great Northern and Great Central Railways announced an alliance in which they
pooled receipts and the management of all rolling stock, lines and works were placed under the
remit of a joint committee. It was an arrangement akin to amalgamation,
however, it just wasn't a legal union.
Other companies
soon followed suit. In June 1908 the London and North Western and Midland
Railways produced a less comprehensive scheme, where all receipts, except those
from coal and coke traffic, were pooled, competitive capital expenditure was ceased and
cooperative and economical train operations were sought. Indeed, this had
considerable success in reducing these two companies' operational expenses. The
Lancashire and Yorkshire Railway joined the agreement in 1909. Furthermore,
early in 1909 the Caledonian and North British Railways drew up a very similar
agreement. Lastly, in August 1910, after nearly a year and a half of negotiation,
the Great Western and London and South Western Railways came to terms. [3]
While the
fragmentation of the modern railway industry is different in many ways to that
which existed immediately after 1900, there is no doubt that in the period knowledgeable industry leaders felt a sensible way to reduce their railway's operational and capital costs was to cooperate.
Indeed, the particular success of the London and North Western and Midland Railway
in reducing these forms of expenditure through unification, is a testament to the
idea that when it comes to railways, collaboration, not fragmentation, can be
preferable.
-----
[1]
Wolmar, Christian, "Fragmentation is the
problem, not the solution", Christian Wolmar's Website,
19 May 2011
[2]
Gourvish, Terry, Railways and the British Economy 1830-1914,
(London, 1980), p.42
[3]
Cain, P.J., 'Railway Combination and Government, 1900-1914', The Economic
History Review, 4 (1972), p.633
