Barclays: The Business of Banking, 1690-1996

Published by EH.NET (March 2004)

Margaret Ackrill and Leslie Hannah, Barclays: The Business of Banking, 1690-1996. Cambridge: Cambridge University Press, 2001. xxi + 481 pp. $60 or ?40 (hardback), ISBN: 0-521-79035-2

Reviewed for EH.NET by Peter Wardley, University of the West of England, Bristol.

Barclays has long been a banking firm of great significance. Originating in 1690 as a private Quaker partnership located in the city of London’s Lombard Street, by the early twentieth century Barclays had grown to become one of Britain’s “Big Five” corporate High Street Banks and a significant financial actor within the international economy. In the 1930s the Barclays group was the largest banking company in the world, a status reflected in its growing orientation to the world economy. At the end of the Second World War a quarter of the Barclays group assets were held abroad and the bank sustained its commitment to international banking so that by the 1980s it owned more “overseas” branches than the combined total of the U.S.’s banks. Today it remains one of the world’s most important financial corporations. In a business where prudence is valued but risk-taking rewarded, three hundred years’ experience is an asset in itself and one worthy of a celebration asserting acumen and longevity in an uncertain world.

This exemplary study, written in a fluent and confident style by Margaret Ackrill and Leslie Hannah,[1] successfully combines narrative business history, to recount three centuries of Barclays’ growth and development, with both a comprehensive survey of the bank’s responses to its changing economic environment and a rigorous assessment of its performance. As befits an official history of one of Britain’s premier financial institutions, impeccable scholarship is buttressed by production values of the highest quality, copious photographic illustrations are accompanied by numerous tables and figures.

Barclays’ enthusiasm for the project is evident not only in these physical attributes but also in the professional advice and intellectual support given to the authors by the bank’s senior employees and directors. While there is a suggestion that more testing times in the 1990s might have stilled this motivation for a moment, this hesitation passed and the authors have been allowed by their sponsor to tell their story without hindrance. With this publication, the business history of Barclays is not only brought to the end of the twentieth century but its earlier history, expounded previously by senior managers of the bank, in W. Matthews and A.W. Tuke’s History of Barclays Bank Ltd. (1926) and A.W. Tuke and R.J.H Gillman’s Barclays Bank Limited, 1926-1969: Some Recollections (1972), is augmented and subjected to independent academic appraisal.

If the tension between tradition and innovation provides an important duality exhibited by the banking industry, such a relationship is also reflected by this study. While its narrative is persuasive, detailed and entertaining, this strong story line is accompanied by convincing analysis which draws heavily on a carefully defined quantitative assessment of the bank’s long-run performance. One notable feature of Barclays, which fully deserves the close attention of any banking analyst or historian is the “Statistical Appendix.” Behind this rather bland title appears a 65-page summary of Barclays’ financial performance which enumerates its growth, profitability, financial structure and exposure due to bad debts. By providing statistical data for the parent firm and its constituent banks, comparative analysis of Barclays and its competitors and an assessment of the bank’s returns to its owners, an appraisal which includes a trans-Atlantic international perspective, this section alone is a valuable contribution to the literature.

Where the Statistical Appendix provides innovation, or at least a notable extension of practices evident in recently-published histories of British banks, it is accompanied by tradition in the application of more established historical skills: diligent search for and careful analysis of archival sources. These are particularly evident in the introductory review of the worldview and behavior of the Quaker private bankers who populated the “cousinhood,” the network of interconnected dissenting families that provided the bank’s access to capital and commercial intelligence. For two hundred years the Quaker community, broadly defined, played a vital role in Barclays’ pre-history.

By the beginning of the nineteenth century, personal investments by Quakers in industry and infrastructure were conducted alongside their banking activities, with each venture providing additional security for the next. In this environment the “Lombard Street bank” thrived to become Britain’s most profitable, Barclay, Bevan, Tritton & Co. Its owners not only avoided the fate of business associates and relatives ruined by the Overend, Gurney crash in 1866 but took full advantage of the many business opportunities this provided. Eventually, in the face of growing competition from developing joint stock banks, the county banks owned by the cousinhood, in the East and the North East of England, were recognized as the potential buildings blocks which would allow further expansion. In 1896 a new company, Barclay & Co., was created by the merger of twelve banks, with the lion’s share of a third of the capital and deposits coming from the Lombard Street firm, and the foundations were laid for what quickly became one of Britain’s “Big Five” national networks of branch banks.

The new bank, which continued to expand by internal growth and merger through the Edwardian period and the First World War, required a formal corporate structure and standard procedures to knit together the growing branch network under the supervision of its head office. Although this was a common development shared by each of England’s large High Street Banks, Barclays differed from its rivals in major respects. Great store was placed on the retention of previously established practices and it was deliberate policy to foster traditional loyalties. Local boards were assembled from its constituent banks and these were often seen to act with rather more independence than was permitted to the local managers of the banks who were its competitors. Here the cousinhood played an important role, though its continuing influence was more obvious to the public in its manifestation on the board of directors.

However, far from being amateurs, and with banking literally in their families’ blood, the gentleman players who sat on the Barclays’ board not only performed on a par with the professionals who ran the other joint stock banks but they also proved adept at accelerating the promotion of young managers of promise who might supplement their acknowledged financial and organizational talents. As the bank’s strategy saw an expansion in the scale and scope of its activities, its corporate structure has been successfully adapted and repeatedly recast to meet the challenges of a global business.

Growth in the interwar years was accompanied by major technological change, a theme which had been relatively neglected in the previous literature, and this aspect of banking has continued to be an important theme of more recent banking history. Ackrill and Hannah provide proper consideration of technical change, which has arrived over the last four decades in the form of new technology, often associated with computers and new products sold to different and often novel personal and business niche markets. Slower to mechanize than its competitors in the interwar years, thereafter Barclays was often an innovator, as it was in 1967 with automated teller machines (ATMs) and in 1966 with its highly profitable VISA Credit Card. In 1961Barclays was the first British bank to operate its own computer, an EMIDEC 1100.

With technological innovation came significant changes in labor processes and the organization of work. Although women had been employed for the duration of the First World War, gender became a major issue for British banks in the 1920s as female employees proved more adept than men when machine banking was introduced, though a glass ceiling was to prevent their elevation to managerial posts for the next fifty years. Barclays’ discriminatory employment policy was not atypical, though recruitment difficulties had pushed upwards the salaries of its female employees, and it was not until the impact of the Sex Discrimination Act of 1975 was felt that the bank confronted this issue.

By the 1970s financial innovations became more urgent as competitive forces increased. Concurrently, the rapidly evolving building societies expanded their range of financial services, while foreign banks entered “The City,” lured by the promise of London’s deregulatory “Big Bang” of 1986. Barclays confirmed its universalist stance in this Brave New Financial World, expanding its “merchant,” or industrial, banking in the 1980s, and investing heavily in BZW (Barclays de Zoete Wedd). However, although the changes introduced in the 1970s and 1980s shared some similarities with measures introduced in the U.S., Ackrill and Hannah (p. 214) insist that it would be an oversimplification to apply the term “deregulation”: “the British reforms are more accurately described as creating a more pro-competitive, market-orientated, comprehensive (and expensive) set of regulations to replace a more informal, restrictive, voluntary, partial (and cheap) regulatory culture.” Overall, technological innovation in banking has proved to be a much more important driver than changes in the regulatory regime.

Barclays contributes to a revisionist strand which has recently added renewed vigor to the historiography of British banking. Until recently the London-based financial sector, especially in the form of the “Big Five” banks, was a popular target selected by some historians seeking convenient scapegoats upon which to heap the economic sins of what they saw as a slothful and indolent British economy. However, recent reinterpretations, which have examined closely both the motives of bankers and the documents which record their activities, indicate clearly that generally British banks conducted their business in a manner which was informed, coherent and profitable. Ackrill and Hannah’s Barclays adheres to this view. With regard to British banking, and in more than one context, they reject outright the analogy of deckchair rearrangement on the stricken S.S. Titanic: and in any case, apart from there being no correspondence here between the two, the interwar British banking industry had no need of the drastic measures required in Germany and the United States.[2]

However, Ackrill and Hannah’s approach is not Panglossian; they identify opportunities shunned and highlight episodes when perhaps the bank sacrificed profits because its reaction was slower than it might have been. Furthermore, as the authors emphasize, the distinctive approach to the question of structure and strategy adopted by Barclays, with its geographically-based local boards that continued to reflect the heritage of its various component parts, demonstrates that there was more than one managerial response to growth through amalgamation.

More generally, their study conforms to a pattern: historians who have assessed banking performance in the light of archival sources have tended to appreciate more clearly the opportunities and pitfalls which faced British banks. Although this behavior on the part of these historians might be regarded as a form of institutional capture, at least in those cases where a close relationship could be demonstrated between researcher and institution, the evidence mustered recently against the proposition suggests strongly rejection of the hypothesis that banks failed the British economy or, more particularly, failed British industry.

[1] While this book was being written Margaret Ackrill and Leslie Hannah were employed by the London School of Economics and Political Science; both have been long associated with the LSE’s Business History Unit.

[2] The fate of the Titanic and the performance of British banks, nor that of the modern British economy, have nothing in common. Given the calamitous collapse of the United States banking system in the early 1930s, if financial historians have to invoke a maritime disaster, then surely the tragic loss in 1915 of the Great Lakes passenger ship the S.S. Eastland, which capsized due to mismanagement at the cost of 844 lives while secured at its berth in Chicago, is a much a more appropriate analogy than the sinking of a state-of-the-art vessel by elemental natural forces in international waters.

Peter Wardley has written several articles on the emergence and consolidation of large corporations; for details see his “The Emergence of ‘Big Business,’ 1890-1921′, ReFRESH (Summer 2001) vol. 30, pp. 4-8 [http://www.ehs.org.uk/othercontent/Wardley30b.pdf]. For British interwar banking, see his article, “The Commercial Banking Industry and Its Part in the Emergence and Consolidation of the Corporate Economy in Britain before 1940,” Journal of Industrial History (October 2000) vol. 3, no.1, pp. 71-96; and, an ISTOS conference paper on “Perceptions of Innovation, Receptions of Change: Responses to the Introduction of Machine Banking and Mechanization in Interwar British Retail Banking” (UPF, Barcelona 2003). [http://humanities.uwe.ac.uk/research%20papers/history/Wardley%20banking%20perceptions%20ver%201%203.pdf]