The expanding market and the urge to manufacture 1914-1923
2.1 The Expanding Market
When the Bowater brothers decided to buy land at Northfleet they presumably hoped to take advantage of the still rising demand for mass-market newspaper and periodicals, but any plans they may have has for building a mill must have been overwhelmed by the outbreak of war.
Construction did not start for ten years, which hardly can have been part of the original intention.
In the meantime, however, the underlying assumption of rising demand remained sound and the newspaper and periodical industry went on growing and developing.
By the time there was at last a mill at Northfleet ready for production, in 1926, its principal customers and prospective customers had carried their business organisation, their products and their competitive methods a long way beyond the stage they had reached in 1914.
The Great War was good for the newspapers. It interfered with the supply of newsprint and raised its price, but it sharpened people’s appetite for news and raised their wages, so more readers fell into the habit of buying a paper regularly.
A.P. Wadsworth speaks of a ‘boom in circulation and profits’ and quotes circulation figures – admittedly not over-reliable- of between 500,000 and 750,000 during the war or soon after, for the Daily News, the Daily Chronicle, the Daily Express, and much more for the Daily Mail.
Northcliffe, early in 1916, wrote: ‘What with the price of paper and the calling up of married men, it looks as if soon she shall have nothing to print and no one to print it’, but really he had little to complain of.
Daily Mail sales rose from about 800,000 a day pre-war to more than one million and although they dropped to 850,000 in 1917 when the price was doubled to a penny, they soon recovered.
In 1920 the Mail’s circulation was claimed to be 1.3 million – the world’s largest – and still rising. To those who seek not only profit but power, newspaper ownership is very risky but very attractive.
Lord Rothermere, a profit-seeker with a taste for power, launched the Sunday Pictorial in 1915 undeterred by failures and near-failures among newly founded newspapers before the war.
Lord Beaverbrook, a power-seeker with an eye to profit with an eye to profit, brought control of the Daily Express at the end of 1916 and in December 1918 launched the Sunday Express.
He could have found easier ways of making profit than putting money first into a sickly newspaper and then into a completely new one, but profit was not altogether what he was after.
Nevertheless he did not underrate its importance and being new to the newspaper business he turned for advice – rather cheekily, it may be thought – to his most powerful competitors, Northcliffe and Rothermere.
Rothermere responded with enthusiasm. It was not long before he joined Beaverbrook in buying out minority shareholders in the Daily Express.
Then after Northcliffe died in 1922 Rothermere, not greatly to the liking of some of his numerous relations, arranged for Northcliffe’s 400,000 shares in Associated Newspapers, which owned the Daily Mail, to be transferred to a new holding company, the Daily Mail Trust, in which Rothermere directly or indirectly owned or controlled nearly half the shares.
The Daily Mail Trust proceeded to buy 49 per cent of Beaverbrook’s holding in London Express Newspaper, paying him partly in cash and partly in shares.
Thus the newcomer to newspapers, Beaverbrook, allied himself with the most powerful group in the business, though he never ceased entirely to compete with it. the alliance eventually broke up, but for several years in the twenties and early thirties Rothermere and Beaverbrook, two very dissimilar characters, were in close if somewhat uneasy partnership: a partnership, as we shall see ( Chapter 4), which came to exert a powerful influence on Bowater.
Rothermere and Beaverbrook were two of the ‘Press barons’ who, controlling larger or smaller groups of newspapers and periodicals, became dominant in their industry between the wars.
In the early twenties the Harmsworth group was the largest, and after Northcliffe died in 1922 Rothermere was at the head of it. In 1915 two other brothers, William and Gomer Berry (Lord Camrose (1929) and Lord Kemsley (1936)), moved from periodicals into newspapers by buying the Sunday Times.
A sustained campaign of expansion during the twenties, largely in alliance with Lord ILiffe (1877-1960), carried the Berrys ahead of Rothermere, from whom in 1924 they bought a Manchester – based group of papers formed by Sir Edward Hulton (1869-1925).
In 1926 the Berrys bought from Northcliffe’s executors the Amalgamated Press, owner of the ancestral periodicals from which the Harmsworths had originally made their fortune.
These great magnates, who had their peers in other publishing groups, were powerful personalities and many of their moves were made for personal reasons.
There were sound commercial motives also, however, for forming their groups.
They spread the very heavy risks of business, they could command the large capital required, they kept the printing plant occupied and they generated sufficient activity to support the costs of mass production.
Newspapers are part of the apparatus of politics and politics dictated arrangements made to take over the Daily Chronicle from Frank Lloyd (for £1m, it is said) in 1918 and to rescue the Daily Herald in 1929.
Bowater-A history Chapter 2
2.2 The Urge To Manufacture
This was the rapidly changing environment in which W.V. Bowater & Sons carried on the last phase of their business as paper merchants, before they became papermakers.
In 1914 there were six Bowaters in the family firm: Si Vansittart and his eldest son Rainald (1888-1945); Frank and his son Noel (b.1892); Fred and his son Frederick (1895-1962), later universally known as Eric.
Rainald was educated at Whitgift Grammar School and came into the business in 1905. Noel, reflecting perhaps the rising fortunes of the family, went to Rugby and, in 1912, started making out bills of lading in Bowaters’ offices for a sovereign a week.
Eric, having left Charterhouse, was sent to Dixons to gain an acquaintance with their trade but said later that he had no commercial experience before the war and hoped to be an army officer.
He had his desire. In 1913 he and Noel were commissioned into Territorial units of the Royal Artillery. Frank was also a Territorial officer,so that when war broke out three of the family went on active service, followed in 1917 by Rainald, and the management was seriously depleted.
All of them survived but, on 4 September 1915, a shell changed the course of Eric’s life.
It wrecked a dugout where he was resting, killed two other officers and trapped him for eighteen hours in the dark, unable to move, wondering whether anyone would find him.
For about three years he used crutches, but then he consulted a leading neurologist, E. Farquhar Buzzard (1871-1945), who, having decided Eric’s symptoms were physical manifestations of mental stress, boldly ordered him to cross the room, which he immediately did.
Ever afterwards he considered that his ailment, having been shown to be psychological rather than physical, had been unreal and therefore shameful, and he was impelled by a strong desire to ‘prove himself’.
The shell-burst wrecked his military ambitions and diverted the force of his imperious personality, against his earlier inclinations, into the family business.
Government control of business activities, even in wartime, was an heretical notion to those who governed England in 1914, brought up as they had been on over seventy years of marvellously successful Free Trade and laissez-faire.
‘Business as usual’ was there slogan, provided for them by Winston Churchill at Guildhall on 9 November 1914.
Nevertheless control came and it came to papermaking as to other industries. From February 1916 onward the import of papermakers’ was more and more heavily restricted and, in March 1918, a Paper Controller was appointed.
Straw was used; rags were collected; waste paper was re-pulped; English woods were cut down.
Production fell while quality grew worse and costs, prices and profits rose, although high rates of Excess Profits Duty, introduced in 1915 and made retrospective to the beginning of the war, snatched a good deal away – some of it from Bowaters.
Profitable the business might be but it could hardly be progressive, especially with Frank, Noel, Eric and, finally Rainald away at the war and Fred, in 1918, called to serve under Lord Beaverbrook at the Ministry of Information.
Two suits against Bowaters for breach of contract, one brought by the News of the World in 1916 and one by D.C.Thomson & Co. in 1917, may be evidence of this wholesale disruption of management. Both suits were settled out of court.
The News of the World accepted £7,500 damages and costs, partly offset by £2,000 received by Bowaters from Peter Dixon in settlement of claims against them.
D.C. Thomson, having claimed £12,000, settled for £4,170 including their costs, suggesting that their claim was somewhat exaggerated. What the grounds for action were, in either case, are not revealed in the scanty records which survive.
These records do show, however, that Bowaters were not prevented by the Great War from setting up a business in the USA, modelled on their similar business in the United Kingdom, to export hydraulically baled surplus newspapers to India and the Far East. The pre-war origins of the project we have already seen in Chapter 1.
Frank was in charge of it and, even after he went into the army, he did not lose touch for, in 1916, he was corresponding, presumably from France, with E.A.V. Capern, Bowaters’ man on the spot.
The business, set up in 1914 as the hudson Packing & Paper Co., was incorporated in the state of New Jersey in September 1916, with $100,000 capital, eventually held as follows:
W.V. Bowater & Sons Ltd. 9,500
Sir T.V. Bowater 2,500
Frank Bowater 2,500
Frederick Bowater 2,500
E.A.V. Capern 2,500
Harry Pickess 500
Capern was President; Pickess, Secretary, Treasurer and General Manager; the three brothers, directors.
In its first year of existence, the company paid a dividend of 15%. it was small, as all Bowater enterprises were in those days, but it established a base for transatlantic operations in the future on a scale which none of its founders is likely to have foreseen.
No complete picture of Bowater’ wartime finances has survived, nor sufficient figures to make even a guess at one, but there are indications that the firm was stronger, breach-of-contract actions notwithstanding, at the end of the war than at the beginning, though in 1915 may have been rather unrewarding.
The Ordinary dividend on £60,000 issued capital was 10%, plus 10% bonus, for 1914, 10% for 1915, 15% free of tax for 1916 and 1917 and 17.5%, free of tax, for 1918.
Probably as much as £36,000 was invested in War Loan during the war and, at the end of 1918, the Board decided to subscribe for £15,000 5% National War Bonds ‘as funds were available’.
Most important of all, perhaps, because it established a solid platform for the firm’s contemplated advance into manufacture, was the repayment in stages, completed on 13 July 1917, of the £18,500 borrowed from Lloyds Bank in 1914 to buy the Northfleet site.
The war against Germany ended, as suddenly and unexpectedly as it began, on 11 November 1918. Before the end of the month, Major Frank – he displayed his rank, as the custom used to be, for the rest of his life – was attending a Board meeting, though evidently still the army.
At that meeting, on 25 November, the younger generation of Bowaters, Rainald, Captain Noel Bowater MC, and Eric, were elected to the Board, though it was made very clear to them that they were junior in status to the three brothers, who were Managing Directors.
Eric had become acting Secretary in September 1917, when Rainald went into the army, but his war-shattered health gave way in the spring of 1918 and he had to give place to yet another acting Secretary, George Pickford.
He apparently told a journalist, much later, that he joined the business in 1921, so perhaps it was not until then that he was physically fit for an executive position, though he was paid the same salary for 1918-19-£1,000 free of tax – as the other junior directors and, when Rainald and Noel received a bonus of £1,000 each in June 1920 for extra services, the same sum was paid to Eric ‘for extra services in connection with the organisation and carrying on [of] the Inland Wholesale Paper Department’.
In the nation’s mood of 1919 there was a good deal of hectic optimism, especially among businessmen, for whom making good the ravages of the war and taking advantage of the opportunities of peace seemed to promise long-lasting prosperity.
The Government hastily dismantled its control of the economy, by this time far-reaching, while a boom set in which was intense and short-lived. In the summer of 1920 the steam began to go out of it. Over a matter of months, unemployment shot up from 400,000 to more than 2.5 million, to the accompaniment of industrial action which some people feared and others, no doubt, hoped might lead to revolution.
The worst effects of this collapse were concentrated in industries – coal-mining, cotton textiles, shipbuilding and heavy engineering – which had supported the prosperity of late Victorian Britain.Other industries recovered fairly quickly but those did not and they were still depressed when the world ran into economic troubles of the thirties.
In 1921 the nation suffered a severe heart-attack and perhaps it has never since truly recovered.
The outlook in the twenties, however, once the worst was over, was by no means entirely gloomy. Unemployment remained intractably over the million mark but, even at that level, 90% or more of the working population had jobs and, outside the heavily depressed areas, standards of living were rising rather than falling.
The slump of 1921 punctured the wartime inflation and the purchasing power of wages and salaries improved, so that there was plenty of scope for marketing the products of consumer goods industries and the services needed to distribute, sell and maintain them.
To balance depression in the coal-mines, cotton mills and heavy industry, therefore, there was prosperity and expansion in the food trades, the motor trade, the electrical and chemical industries- and the manufacture of newsprint.
Newspapers were not the least of the consumer goods which consumers were buying more. Bowaters’ experience on the post-war switchback shows up in profit figures published in a share-issue prospectus in 1926 ( Table 1).
Bowaters’ profits at this level were small by comparison with those of their major suppliers and customers, the large paper mills and the newspaper groups.
They were adequate, nevertheless, to provide the six members of the family who were directors with a satisfying standard of upper-middle-class comfort and to enable the head of the family to support the dignity of the Lord Mayor of London in 1913-14 and of MP for the City of London after 1924.
The profits came from selling newsprint and other grades of paper at home and abroad; from the sale of ‘sundries’ – china clay, belting, machine wires and other papermakers’ supplies; from trade in hydraulically packed waste carried on from London and Glasgow and from New York.
A very important part of the firm’s complete package was service: warehousing, wharfage, haulage, lighterage facilities were designed to get orders to customers as promptly as possible and to cope with sudden fluctuations in the demand for newsprint.
Figures from W.V. Bowater & Sons’ Private Ledger suggest that home sales of paper and the trade in waste were of about equal importance, accounting together for approximately 80% of Trading Account gross profits, with most of the rest coming from exports, though since the Australian profits are no included in the figures they must be understated (Table 2).
Australia and New Zealand were much the biggest takers of British exports of newsprint and Bowaters had for years cultivated their markets.
Bowaters’ post-war profits fluctuated, but the directors were convinced that the prospect before them, as the worst of the slump passed away, was encouraging.
A survey of market conditions written in 1926, covering the years since 1919, pointed out that Bowaters’ main markets were the United Kingdom and Australia and went on:
The consumption of Newsprint has increased steadily throughout the world before and since the War; growth since the War has been phenomenal and is of an entirely steady nature and every indication points to a continuation of such growth, which has brought about largely by increased circulations owing to the more widespread readings of Newspapers and the consequent steady and heavy increase in advertising.
In support, the author of the paper quoted figures of newsprint consumption in the United Kingdom, though without saying how he arrived at them (Table 3). The figures for exports to Australia were even more appetising (Table 4).
By 1923, even without foreknowledge of the figures for later years, the outlook was promising enough for the possibility of building a mill to begin to harden into certainty.
Eric Bowater, the youngest director, was anxious not to dawdle. The firm, he thought, was not large enough to go on supporting six members of the family indefinitely.
The merchant business had probably reached its zenith, from which a slow decline might follow, or a takeover by one of the exuberant Press barons.
Bowater-A history Chapter 2
He thought also that his uncles, though not his father, ‘saw him as an impractical dreamer whose flights of fancy might well ruin a successful business’.
He regarded them as over cautious. Sir Vansittart, in 1923, was sixty-one; Major Frank, fifty-seven; Sir Frederick (KBE 1920 for war work), a small, dapper man of considerable charm, with a small beard, fifty-six.
Sir Vansittart presided with dignity over the affairs of the firm rather than actively managing them.
He and his brothers shared an office, to which, at eleven o’clock every morning, Sergeant-Major Stapleton, blind in one eye from a Boer War wound, would bring port and whisky on a silver salver.
One morning he tripped on a telephone lead and fell on his face. Sir Vansittart, puffing on a cigar, observed: ‘The man’s drunk.’ No more was said.
A mill would need capital than this small patriarchy could command. The Board would have to look outside the family for investors, and for technical support as well, for no Bowater was an engineer.
At a Board meeting on 3 July 1923 ‘The matter of the suggested scheme for the floatation of a Company to construct a new paper mill on the Northfleet property site was discussed, Mr E.V. Bowater reporting to the Board the tentative arrangements which had been made with Messrs Armstrong, Whitworth & Co. Limited.
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