Читать книгу From Empire to Europe: The Decline and Revival of British Industry Since the Second World War - Geoffrey Owen - Страница 23

By the early 1960s advocates of rationalisation on the US model were gaining ground. They argued that the industry’s weakness stemmed in large part from the lack of co-ordination between its different sections, and that this could only be remedied by consolidation into larger groups. Control over all phases of the production chain, from spinning and weaving through to finishing and distribution, would also make the manufacturers less vulnerable to the stock fluctuations which were a notorious feature of the textile business. Another argument was that the growing use of synthetic fibres was eroding the traditional boundaries between processes.²⁸ The successful textile company would need to be a multi-fibre, multi-process operation, enjoying economies of scale in production and carrying sufficient weight in the market to bargain effectively with customers. This last point was particularly important because of the increasing dominance of the multiple retailers, especially Marks & Spencer, in the clothing trade.

An articulate exponent of this view was Cyril Harrison, chairman of English Sewing Cotton. This company, originally a sewing-thread producer, had diversified into spinning and weaving. Harrison made several further acquisitions in the 1950s and early 1960s, but his resources were limited, and if the industry was to be restructured in a substantial way an outside catalyst was needed. That catalyst then appeared in the form of Courtaulds, a larger and wealthier company than English Sewing Cotton, and one which had particular reasons for intervening in Lancashire’s affairs.

Courtaulds had built its reputation in the nineteenth century as a weaver of silk mourning crêpe; the original family company, Samuel Courtauld, was founded in 1849. In 1904, in a classic entrepreneurial coup, it secured the rights to the manufacturing process for viscose rayon. Once the process had been fully commercialised, rayon proved to be a huge money-spinner. Courtaulds was one of Britain’s most profitable manufacturing companies between the wars. But it failed to capitalise on its success. Regarding itself as a textile rather than a chemical company, it did not invest in research and missed out on the development of synthetic fibres, the first of which was Du Pont’s nylon.²⁹ Courtaulds’ involvement in nylon came about through a partnership with Imperial Chemical Industries (ICI), which under the terms of its technical agreement with Du Pont was licensed to manufacture nylon in Britain. The two British companies formed a joint venture, British Nylon Spinners, which began producing nylon commercially in 1949.³⁰ The next breakthrough in synthetic fibres was polyester, invented by scientists at Calico Printers Association (CPA) in 1942. The rights to this process were secured by ICI and, much to the irritation of Courtaulds, it chose to exploit the new fibre independently, under the brand name Terylene, rather than through British Nylon Spinners. The first Terylene plant came on stream in 1954.

Courtaulds was in a difficult position. Its largest business was rayon, but this was the oldest and slowest-growing of the man-made fibres. It was shut out of polyester by the CPA patents, and had only a half share in British Nylon Spinners. One way forward was to step up its own research. Work began in the early 1950s on an acrylic fibre, launched in 1957 as Courtelle, but by that time a rival product from Du Pont, Orion, was already well established in the market. Another was to expand in textiles. Courtaulds had retained an interest in weaving through Samuel Courtauld, and this side of the business was enlarged in 1957 by the purchase of British Celanese, a company which had extensive textile and garment-making operations as well as being Courtaulds’ last remaining competitor in rayon; it also had a pilot plant for the production of nylon, using a different process from that used in British Nylon Spinners. A third strand in Courtaulds’ strategy was to diversify outside fibres and textiles, principally in paints and packaging. The architect of the diversification programme was Frank Kearton, a scientist who had joined Courtaulds in 1946 as head of the chemical engineering department; he had previously worked for ICI, and had been involved in the atomic weapons project during the war. Kearton quickly established a reputation within the company as a forceful and determined manager, and was appointed to the board in 1952.

The partnership with ICI in British Nylon Spinners did not go smoothly. There were arguments over the prices which ICI charged for intermediate chemicals, and as both companies built up their separate fibres activities there was increasing scope for conflicts of interest. In the summer of 1960 Paul Chambers, newly appointed chairman of ICI, suggested to his opposite number at Courtaulds, John Hanbury-Williams, that the two companies should merge. Although Hanbury-Williams favoured this idea, his colleagues did not, and the matter was dropped. A year later Chambers revived the proposal, arguing that a merger would not only tidy up the situation in British Nylon Spinners, but would also create a powerful British fibre group which would compete more effectively against Du Pont and the other world leaders. Chambers pointed out that, whereas in Britain British Nylon Spinners made nylon, Courtaulds made acrylic fibre and ICI made polyester, Du Pont had all three fibres under its own control.

After several months of inconclusive talks, Chambers decided in December 1961 that the only way of breaking the log-jam was to appeal directly to the shareholders of Courtaulds, offering to buy their shares in exchange for shares in ICI. This would have been the biggest merger in British corporate history, and in resorting to a hostile take-over Chambers was using a technique which was still highly controversial. Some of the Courtaulds directors, including Kearton, accepted the logic of ICI’s arguments, but objected to the terms being offered. Others, especially the two members of the Courtauld family who sat on the Board, were determined to keep the company independent.

If there was a possibility of a compromise, it was removed by clumsy tactics on the part of ICI, and an acrimonious battle began. Although Kearton was a relatively junior member of the board, he played a prominent part in the defence campaign. At a memorable press conference in the middle of the contest, he lashed into ICI’s record, complaining about the high prices ICI charged for its chemicals, contrasting the slow development of Terylene with the success of Courtelle, and predicting a sharp fall in ICI’s profits. As the company’s historian records, Kearton ‘threw figures about with cheerful abandon and some inaccuracy … raised laughs, bubbled with ideas and was the total antithesis of the old, stuffy Courtaulds’.³¹ By conveying the impression that Courtaulds was about to enter a new era of profitable growth, Kearton helped to shift opinion in the City of London away from ICI. The outcome was an embarrassing defeat for Paul Chambers, leaving ICI with an unwanted 38 per cent shareholding in Courtaulds.

The effect of the bid on Courtaulds was to sharpen the need for a clear strategic direction, and to enhance the reputation of Frank Kearton, inside and outside the company. Although some of his colleagues were uncomfortable with his egocentric personality and erratic temper, Kearton brought a new dynamism to a company which had become a rather sleepy member of the British estabishment. He was appointed deputy chairman in 1961 and chairman three years later.

Kearton had reached the conclusion before the ICI bid that diversification did not provide a long-term future for Courtaulds and that there were limits, because of competition from ICI, Du Pont and others, to what the company could do as a fibre producer. The alternative was to move further into textiles, both as a captive outlet for fibres and as a growth business in its own right.³² Kearton and his colleagues convinced themselves that the decline of the Lancashire cotton industry could be halted by an injection of capital, technology and modern management, and that, once modernisation was complete, it would be able to compete with low-cost imports from developing countries.³³ Both Kearton and his finance director, Arthur Knight, were influenced by the example of the integrated textile companies in the US, which, despite high wages, produced fabrics as cheap as or cheaper than European mills. The key to their success lay in scale and standardisation, producing long runs of standard fabrics in large, well-equipped factories, and this was the model which Courtaulds planned to replicate in Britain. As one of Kearton’s fellow directors put it, ‘it is a concept of genius, worthy of England’s best days, that the brains of the new fibres should assume the responsibility of putting fresh life into the traditional textiles’.³⁴

The initial plan, formulated in 1962, was the ‘Northern project’, whereby Courtaulds would take over five of the largest spinning companies in Lancashire – Lancashire Cotton, English Sewing Cotton, Tootal, Combined English Mills, and Fine Spinners and Doublers. ICI, as a major shareholder in Courtaulds, was consulted about the proposal and agreed to participate; Courtaulds was to take a 55 per cent stake in the new group, ICI the remaining 45 per cent. Negotiations on this five-way deal broke down because one of the companies thought that its shares were undervalued, but the appetite for mergers had been whetted. In 1963 two of the five, English Sewing Cotton and Tootal, got together, with ICI and Courtaulds each taking a minority stake, and in the following year Courtaulds bought Lancashire Cotton and Fine Spinners and Doublers. This was the start of an extraordinary wave of take-over activity which transformed the structure of the textile industry over the subsequent decade.

Unlike the 1959 Act, this was a private-sector solution to Lancashire’s problems, but Kearton looked to the government for support on the issue of imports. He argued that temporary protection was justified while the industry was being reorganised. The Conservatives were still in office, and they were anxious not to offend the Commonwealth. However, ministers applauded what Courtaulds was doing in Lancashire and were willing to consider granting some relief, perhaps replacing the voluntary quotas on Commonwealth imports with tariffs. By this time the first steps had been taken on an international level to regulate the flow of textile imports from developing countries. In 1961 the US government took the lead in promoting an agreement between the principal exporting and importing countries which limited the growth of imports from developing countries to 5 per cent a year; the importing countries were also allowed to take restraining measures if imports threatened to disrupt their domestic market. This agreement was initially limited to cotton textiles and clothing, but was converted in 1973 into the Multi Fibre Arrangement (MFA), covering all fibres.³⁵

Courtaulds welcomed these moves, but they did not directly affect Britain’s duty-free imports from the Commonwealth, which remained the industry’s greatest anxiety. In October 1964, thirteen years of Conservative rule came to an end with the election of a Labour government under Harold Wilson, and the change seemed likely to be helpful for Courtaulds. Wilson had made industrial modernisation a central plank of his election campaign. He believed that many British firms were too small to compete effectively against larger international competitors, and that a major programme of rationalisation was needed. What Courtaulds had started to do in textiles was in line with this philosophy, and Kearton was much admired by Labour ministers. In 1966 the government set up a new agency, the Industrial Reorganisation Corporation (IRC), to promote mergers, and Kearton was appointed chairman. In this role he had a hand in some of the biggest mergers of the 1960s, including the creation of British Leyland Motor Corporation and the amalgamation of the three big electrical companies, GEC, AEI and English Electric. The IRC did not involve itself in the restructuring of the textile industry, not because Kearton was chairman, but because the merger movement was rolling along at a spanking pace and needed no prodding from Whitehall.

The awkward matter of ICI’s shareholding in Courtaulds was resolved in 1964 with an agreement which swapped these shares for Courtaulds’ stake in British Nylon Spinners. Courtaulds was now free to go ahead with an independent nylon venture and to compete against ICI in polyester. But it was a late-comer in both markets, and this reinforced the case for acquiring textile and garment companies which would provide guaranteed outlets for the company’s fibres. Kearton’s aim was to secure a share of about 30 per cent in the various markets in which its fibres were sold. In cotton spinning this was to be achieved through acquisitions. In weaving, since most of the existing mills were regarded as too small, the company built new factories on greenfield sites, making full use of the government grants which were available in areas of high unemployment.³⁶ Outside Lancashire, Kearton bought hosiery and knitwear companies in the East Midlands; they were important customers for Courtelle and nylon. He also acquired wholesalers, some with well-known brand names, in the hope of establishing a counter weight to the multiple retailers. Kearton resented the power which Marks & Spencer exerted over the garment and textile trade.

As a large manufacturer of synthetic fibres, ICI had as much interest as Courtaulds in an efficient textile industry, but it had no wish to own textile companies. Its policy was to take minority stakes in selected firms and encourage them to make further acquisitions. Of the six companies supported by ICI during the 1960s, the strongest was Viyella. This was the creation of an ambitious entrepreneur, Joe Hyman, who, unlike Kearton, had spent his entire career in the textile business. He had started as a merchant-converter and his instincts were those of a merchandiser. In 1957 he bought control of a knitwear company, Gainsborough Cornard, which supplied nylon lingerie to Marks & Spencer and other retailers. Four years later he engineered a merger with a larger East Midlands firm, William Hollins, which owned the well-known Viyella brand.³⁷ The merged group was renamed Viyella International, with Hyman as chief executive. He was determined to push into Lancashire, which he believed would be transformed by polyester/cotton blends, just as nylon had revolutionised the knitting industry.³⁸

In 1963 Hyman persuaded ICI to take a minority stake in Viyella as part of a £13m injection of equity and loan capital, and he promptly embarked on a flurry of acquisitions. Like Kearton, Hyman believed in the virtues of size, but his approach was more market-driven than that of Courtaulds; one of his greatest successes was to establish the Dorma brand as the market leader in polyester/cotton sheets.

Although ICI’s investments were not directed against Courtaulds, there was an obvious risk of conflict as the two companies pursued their separate strategies. With Courtaulds now moving into nylon and polyester, they were competing for the same customers. Kearton himself appears to have had doubts about the wisdom of a head-on fight. In 1966 he suggested a deal whereby the two companies would merge their fibre interests in a single, jointly owned company, and Courtaulds would combine its textile interests with those of Viyella. But ICI was now making handsome profits from nylon and Terylene, and the idea of an all-British fibres merger was no longer as attractive as it had seemed to Chambers five years before.³⁹

The next move came from Hyman, who had become disenchanted with ICI’s textile policy. He thought that ICI was ‘Balkanising’ the industry by taking minority stakes in a number of textile companies and encouraging them to undertake expansion programmes which they were incapable of managing. He pointed to the example of Carrington & Dewhurst, one of ICI’s clients, which was building up its knitting and finishing interests in direct competition with Viyella. In 1967 Hyman broke his links with ICI and a few months later launched a take-over bid for English Sewing Cotton, in which both ICI and Courtaulds still held minority interests. English Sewing Cotton rejected Hyman’s offer and arranged a friendly merger with Calico Printers Association; the merged company was renamed English Calico.

Up to this point the Labour government, though not directly involved in the restructuring process, had taken a benevolent stance. In 1966 it had responded to the industry’s pleas for protection by introducing a system of global quotas on textile imports from developing countries, including the Commonwealth. The manufacturers regarded the quotas as far too high, and continued to press for tighter controls. The government then invited the Textile Council (the old Cotton Board reconstituted to embrace other fibres) to conduct a thorough study of the issue as part of a wide-ranging investigation of the industry’s prospects.

In the meantime a small time bomb was ticking away in another part of the Whitehall machine. In 1965 the Board of Trade had asked the Monopolies Commission to examine the rayon market. This was in line with the established policy, dating back to the Monopolies and Restrictive Practices Act of 1948, whereby industries in which a single company accounted for more than half the market could be subjected to review by the Commission. Courtaulds was virtually the sole supplier of rayon, and the Commission had to decide whether its dominance adversely affected the public interest. Kearton and his colleagues were upset that the Board of Trade had referred them to the Commission, pointing out that any monopoly power which Courtaulds might enjoy in rayon was constrained by competition from other fibres. They were even more upset when the Commission found, in its report of 1968, that the company’s monopoly in rayon was against the public interest, and recommended that Courtaulds should be barred from making further acquisitions in textiles if such acquisitions gave it more than 25 per cent of the relevant market.⁴⁰

This left the government in a dilemma, committed to two apparently contradictory policies – promoting mergers with one hand, attacking monopoly with the other. While the government delayed its response to the Commission’s report, Courtaulds announced, in January 1969, yet another large take-over bid, for English Calico. This was the last straw for the ICI directors. They feared that, if the bid went through, Courtaulds would have such a tight grip on the textile industry that their own fibre business would be at risk. They hatched an alternative scheme whereby English Calico, Carrington & Dewhurst and several other firms would come together in a consortium, with ICI holding a 40 per cent stake. At the same time they pressed the Board of Trade to block the Courtaulds bid. Faced with this ‘confrontation between two great powers’,⁴¹ the government set up a committee. Edmund Dell, Minister of State at the Board of Trade, conducted an inquiry into the structure of the industry, which concluded by recommending a temporary standstill on mergers among the five major textile groups – Courtaulds, Viyella, Carrington & Dewhurst, English Calico and Coats Patons.⁴²

The weakest of these five was Carrington & Dewhurst, which with ICI’s money behind it had embarked on a series of ill-judged acquisitions, culminating in a disastrous attempt to establish Crimplene, ICI’s brand name for textured polyester filament yarn, in West Germany. As the largest shareholder and a major fibre supplier, ICI could not afford to let the company collapse. The solution was to merge it with Viyella, which, though no longer financially linked to ICI, was an important customer for its fibres. In December 1969, Joe Hyman, who had fallen out with his fellow directors, was dismissed from his post as chairman. ICI promptly announced its intention to bid for Viyella and then to sell it to Carrington & Dewhurst. This would give ICI 64 per cent of the combined company and contravene the government’s merger standstill. Another government committee was set up, this time under Harold Lever, the Paymaster General, who recommended that ICI should be allowed to go ahead with the Carrington/Viyella merger, on condition that it reduced its voting power to not more than 35 per cent. The merger provided a short-term solution for Carrington’s problems, but had the unfortunate consequence of weakening Viyella, which had been one of the most progressive firms in the industry. Viyella’s senior managers opposed the merger, and several of them left shortly after it was completed. The new company, known as Carrington Viyella, never achieved the sense of mission which Hyman had briefly inspired in the 1960s.

The purpose of all this take-over activity, confused though it was by inter-company rivalries, was to strengthen the competitiveness of the industry. How well it had done so was one of the questions addressed in the Textile Council’s report, commissioned by the government in 1967 and finally published in March 1969.⁴³ Not surprisingly, given the role played by Courtaulds in drawing up the report, the Council concluded that the restructuring process had been wholly beneficial. Pointing to the modernisation and re-equipment which was then under way, the report predicted that costs in cotton spinning and weaving would be reduced by 25 per cent and that by the mid-1970s the leading firms would be at least as efficient as their Continental counterparts. The shift towards scale and vertical integration would make possible longer production runs, better quality control and more effective monitoring of stocks at each stage in the production chain. The one proviso was that the government must take a firmer line on imports. The government welcomed the report, agreed with its conclusions, and – in a decision which was seen in the industry as marking a fundamental change of policy – announced that tariffs on Commonwealth imports would be imposed from the start of 1972.⁴⁴ Lancashire seemed set for a fresh start.