The decline of British industry

By Paul Walker 01/01/2013

That the British car industry is not what it once was is obvious but you are left asking why it has collapsed so dramatically. Part of the answer may be found in the attitudes of the managers of British companies post World War two. In a short set of notes on the full cost controversy G. B. Richarson writes,

In the 1950’s, when I was Chairman of the Economics Research Group, two directors of Morris Motors ( a large automobile manufacturer ) with whom we met informally after dinner in a Oxford college, told us that they had set a price for their very successful Morris Minor car at what they considered a fair level. Given that there was then a long waiting list for the vehicle, we asked why they did not charge more. We were told that this would be profiteering, that the firm would not unfairly exploit a current scarcity, as this would be wrong in principle and threaten customer goodwill.

Such a pricing policy may seem “fair” but it comes at a cost as Richardson notes.

This policy seemed to me then, and would seem to most of us today, commercially unwise; had the firm made the most of the situation then obtaining, it could have accumulated the funds needed for future development and thus been better able to face its competitors, still temporarily disabled after the conflict, once they again got into their stride.

A lack of funds to finance future development of their product range may well have been one factor contributing to the inability of the British car industry to deal with the threat coming from the development of car industries in other countries, mainly of course, Japan.

But the attitudes of the management of the British companies may also have hampered economic development in other ways, in particular via the professionalism of British management. Richardson goes on to say,

[ … ] but it is at least possible that British business management was at that time less able and less professional than today.The directors of Morris Motors to whom I referred had remarked to us, apparently with satisfaction, that none of their number were university graduates. The founder of the business, William Morris, later Lord Nuffield, had started his business career by running a cycle shop in Oxford; his successors may have seen this as showing the superfluousness of higher education, [ … ]

But such a view was not shared by all,

[ … ] it is notable that Nuffield himself established a graduate college in Oxford named after him.

What all this suggests is that businessmen – and policy makers – are influenced by the nature of the attitudes and world view of their times. This can work against economic development.

0 Responses to “The decline of British industry”

  • I wonder if you’ve checked british car production recently?.

    Current projections are that growth will continue at about 9 percent and exceed the 1970s peak of 1.9 million by 2015.
    Around 75 percent are exported, and vehicles represent about 11 percent of exports. They also make engines for export and IIRC total current value of industry is about 50 billion.

    A goggle search should reveal the details, and one of the problems constraining growth is lack of skilled engineers and technicians.

  • The point here is that the attitudes of businessmen and policy makers have changed since the 1950s. The decline in market share forced people to change their views. The professionalism of management, for example, has much improved.