This chapter surveys the economic and business context within which British employers managed their labour force from the turn of the century to the Second World War. It stresses the major market fluctuations which resulted in dramatic shifts in the balance of power between employers and their employees. The chapter considers changes in market structure, in particular the growth of restrictive and protectionist practices which contributed to the maintenance of the traditional pattern of labour management. The period also saw a significant growth of large firms, especially in the newer sectors of industry; however, changes in corporate structure and managerial hierarchy came only very slowly and this inhibited the development of labour management. Finally the chapter deals with the management of production. Though there were important changes in production methods, there was also considerable continuity in work organisation and traditional patterns of work relations remained strong in many industries.

Economic conditions of war and depression

The early years of the twentieth century saw a continuation of the relatively poor economic performance of the British economy which had first become evident in the late nineteenth century. In the Edwardian period up to the First World War, there was a sharp deceleration of growth in output, industrial productivity, and incomes. Investment overseas yielded higher returns than capital invested in British industry and Britain's share of world manufacturing output and trade fell. It is not surprising that in these circumstances concern about foreign competition grew and anxieties about Britain's ability to meet the challenge mounted. The First World War hastened some trends and retarded others.

The purpose of this book has been to examine the development of labour management in Britain from the late nineteenth century more or less up to the present. It has argued that historically most British employers externalised many aspects of labour management and only slowly and hesitantly built strong internal structures. The fact that there were always exceptions to this general pattern and that a few large firms pursued strategies of internalisation is explained in terms of different market contexts, corporate structures and managerial hierarchies, and production technologies. In the following section the argument is summarised chronologically. The next section then reformulates the conclusions in more thematic terms. A final section reverts to the propositions outlined in Chapter 1 and draws some broader conclusions.

A chronological overview

The British economy in the late nineteenth and early twentieth centuries was characterised by a large number of small, family-owned and-managed enterprises catering for highly differentiated markets at home and abroad. Internally within most firms managerial hierarchies were weak, and owners often relied on various forms of sub-contracting and on largely independent foremen for workplace control. Some large enterprises existed, notably the railway companies, the gas companies, and a few manufacturing firms, and these had more extensive managerial hierarchies. From the 1870s onwards, British entrepreneurs witnessed an intensification in foreign competition, especially from Germany and the US, and there was a growing recognition of this competitive threat. One response was the merger wave at the turn of the century. However, this mainly resulted in loose defensive amalgamations held together as holding companies and there was a failure to develop more sophisticated managerial hierarchies.