Capitalism Canals: The Making of a Nation

This is the story of how canals changed and shaped our modern world.

Carrying huge volumes of goods and fuel,

they were a stimulus to Britain's great Industrial Revolution.

But they also gave us much, much more,

and their legacy lives on, often in surprising ways.

My name's Liz McIvor.

I've spent my life studying and talking about history.

And now I think it's time to take a different look

at our inland waterways.

The boom years of canal building

were fuelled by a frenzy of public interest

in the moneymaking potential of this new form of transport.

There were fortunes to be made and lost in an emerging world

of shareholders, dividend pay-outs and stock exchanges.

So, how did the canal age create this new type of capitalism,

when middle-class investors helped to transform the British landscape

and bring sweeping industrial change?

London is the beating heart of British capitalism.

Perhaps even of world capitalism.

A place brimming with entrepreneurial spirit,

where risk and reward often go hand-in-hand.

Canals played a key part in creating this enterprise culture.

They offered new investment opportunities,

and one of the most exciting was this canal,

then known as the Grand Junction.

Back in the early 19th century, it was the M1 of its day,

an express route between the Midlands and the booming capital.

The seeds for the Grand Junction were planted by the success

of the first wave of British canals, which appeared from the 1760s.

These were built by industrialists

like the Duke of Bridgewater, Josiah Wedgwood,

who realised they had to create their own transport networks

to maximise profits from their mines and factories.

But the big profits made by early canal owners

persuaded the newly-prosperous middle classes

that canals were money-spinning ventures in their own right.

And, by investing in shares,

they hoped to make big profits from the dividends they paid out.

The growth of the middling ranks is clearly a key factor

in the subsequent financing of canals.

There's a lot more people, there's a lot more urbanisation.

Obviously, London hugely increases.

There's lots more people working in and around industry and trade,

and that's generating capital, that, if it's not being taxed,

was to seek other areas like canals.

With the loss of Britain's American colonies in 1783,

following the War of Independence,

opportunities to invest money overseas were far more limited.

By the 1780s, we are seeing a movement

away from just industrialists

and landowners investing in canals

to wealthy London merchants,

indeed, London merchant banks,

seeing there's a big profit to be made in canals.

After all, canals look as if they're revolutionising the economy.

Surely, that can only go up and up and up.

The same thing happened in the 1990s with the dot-com bubble.

You've got that optimism and that magnet for money.

Suddenly, canals were all the rage,

leading to an intense period of speculation in the 1790s

known as Canal Mania.

People started not only investing but speculating,

which meant buying up shares

and then selling them on almost immediately for a profit.

And to appreciate how quickly this mania gripped the nation,

just look at the number of canal acts that were passed.

In 1790, there was only one new canal authorised by Parliament,

while three years later, there were 20.

In 1793, at the height of Canal Mania,

one of the key routes trying to get a green light through Parliament

was one that would directly connect London and Birmingham.

Birmingham, with its industrial heart in the Midlands,

needed better access to London's markets

for its coal and its other goods.

There was definitely a strong economic case to be made

for a shorter and more reliable route between Birmingham and London.

The existing one, via the old Oxford Canal,

was circuitous, to say the least,

and meandered along for nearly 250 miles.

Barges had to navigate a long section of the Thames,

which was prone to seasonal floods and droughts.

A new canal, to be called the Grand Junction,

running between Braunston and Brentford,

just to the west of London,

would knock around 60 miles off the distance.

This crucial canal was going to be THE big route of its day.

It was a prime opportunity for investors to pile in and make money.

But to get the project off the ground,

it needed a high-profile public champion.

And that's exactly what it got,

in the shape of the Marquess of Buckingham.

Having held several government offices, including Home Secretary,

he decided he would now use his influence to promote the new canal

and deliver economic benefits to his home county of Buckinghamshire.

In the summer of 1792,

the Marquess held a public meeting here in the town

of Stony Stratford, an important coaching stop on the way to London.

The meeting kicked off here at The Bull,

but there were so many people who arrived to subscribe for shares

in this new canal that there simply wasn't room.

And, reportedly,

they all had to relocate across the road to the parish church.

It was the only building in town big enough to house everyone.

These first subscribers to the Grand Junction

pledged £350,000 of capital.

An initial survey of the new canal, paid for by the Marquess,

was approved, and a committee was set up.

Its elected chairman was the canal's second major champion,

William Praed, an MP from a Cornish banking family

who wanted to wave the flag for business interests in London.

The huge amount of interest in the Grand Junction

generated by the meeting here at Stony Stratford

caused something of a speculative bubble.

By the end of 1792, the shares had quadrupled in value

and this was before the canal had started being dug,

and even before approval from Parliament had been granted.

Some of the shares just were valued at £100,

and even before the Act was passed,

they were valued at around £450.

So that was the case for the Grand Junction Canal.

So there was a huge increase in a short period of time.

So, for people who were able to sell fast,

there was a potential of making a quick return.

During these heady days of Canal Mania,

schemes sprang up all over Britain,

with spectators scrambling to add their names

to different subscription lists.

The promoters would announce that they had this dream of creating

a new canal, and they would send out a notice,

people would see the notice

and they were willing to actually just quickly, cheap horse and cart,

and travel miles to just stand in a field

and have their name on the list.

So there was a bit of a frenzy there to just be part of this

new transport system that was going to be created.

For speculators, there was big money to be made from canals.

In 1793, for example, £100 shares in the Birmingham and Fazeley

rocketed in value, trading at a premium of well over £1,000.

There are some similarities with the dot-com bubble

that happened in the late 1990s, 2000s.

These were new technologies,

people didn't know what they were investing in,

most people wouldn't have known what they were investing in.

So some will have made a lot of money from some good schemes

that are still running, and others will have lost everything.

By 1793, the floodgates had opened,

and Canal Mania was reaching such epidemic proportions

that the government actually held a debate on whether or not

dealing in canal shares should be limited,

and whether such high profits should be curbed.

They were worried about too much of the country being covered by canals.

Although they voted against taking any action,

it was noted that one honourable member wished his grandchildren...

"might be born web-footed,

"that they might be able to swim in water and live on fish,

"for there would not be a bit of dry land in this island to walk upon."

The Grand Junction didn't just attract

those wanting to speculate for a quick profit.

It appealed to longer-term investors, too.

Clues to the types of people these were

can be found in the canal's financial records,

held at the National Archives in Kew.

One of the documents is from 1815

and is a list of shareholders in the canal.

The book's full of names of people who are basically

landed gentry, or who are middle class,

who have quite a bit of money to invest in the canal.

And in amongst the £200 shares, there are also some smaller amounts

and what's clear is that there are signs of an emerging middle class.

This entry for William Burt,

who is a builder of Swallow Street, Piccadilly in London,

he's only investing £30, which isn't a great deal of money,

but it's interesting to see that he's obviously done well and

he wants to invest the money, the profit he's made,

in a scheme to get even richer.

So, after a builder in the book, you also have a grocer,

Sam Munn of Kettering in Northamptonshire.

He's investing in this case £24 in the canal.

What we have to remember is investment in the canal

like this is a long-term investment.

It's designed not just to make them rich,

but to improve the lives of their children and their grandchildren.

It's social mobility, written down.

Apart from the men's names listed in the shareholders' journal,

there are quite a few women listed here as well.

On this page, for the 13th of July,

is Eleanor Brownell of Liverpool, spinster.

And she has £24 worth of shares,

but what's more interesting is the fact that she's

listed as a single woman and single women often were encouraged...

Middle class women were often encouraged to

invest in schemes like this, in order to provide for themselves,

should they not be able to marry well, or at all.

The Grand Junction was making money for some people before it was built,

or even approved, and before that could happen, the Marquess

and William Praed had to fight off some stiff

competition from other canal companies.

The Oxford canal proprietors were not at all amused at the project

to short-circuit their canal by a direct line from Braunston to London.

And they entered some very vociferous opposition

and a lot of backstairs diplomacy was

entered into between the supporters of the Oxford canal project,

who wanted to build their own cut-off canal into West London

and eventually,

they managed to come to a compromise agreement whereby

the Grand Junction agreed to pay compensation tolls to the Oxford

Canal Company, should their revenue ever fall below £10,000 a year,

which in those days was a very considerable sum.

The Oxford Canal were always at daggers drawn with

the Grand Junction Canal.

I can remember even in the '50s and '60s, Oxford Canal employees were

always very suspicious of anybody who'd come off the Grand Junction.

"What are you doing down this way?"

Didn't like it at all.

After seeing off its rival,

the Grand Junction could now seek official parliamentary approval.

Ever since the British Government had intervened to avert

a banking collapse during the infamous South Sea Bubble

fiasco of the 1720s, the state needed to authorise

the amounts of capital raised for big projects like canals.

A bill was successfully passed in 1793, steered through by

William Praed, and with the Marquess as one of its principal sponsors.

Work could now begin and by the year's end,

around 3,500 men were busy building the canal.

Most of the engineering works were carried out by pick, shovel,

horse and cart.

Construction of the Grand Junction was now under way,

but there would be more obstacles to overcome,

which would send costs spiralling upwards to jeopardise

the potential profits of the shareholders.

For one thing, just to the west of Watford,

the canal route passed through two estates belonging to the

local landed gentry, who needed to be appeased.

After a lot of negotiations, both the Earl of Clarendon

and the Earl of Essex, who owned the adjoining parks,

agreed to let the canal company come down through here

and one of the conditions was that they had to landscape it

and it had to be made as picturesque as possible.

As befitted a gentleman's estate.

And, of course, that's not necessarily cheap to do.

No, it isn't.

Further north, at Grove Park, you've got quite an expensive stone bridge,

taking the main driveway into Grove Park from the old Watford Turnpike.

And that must have been quite a bit more expensive than

the ordinary run of the mill canal bridge.

The Earl of Essex also made the canal company build a house where

they had to station a man whose job it was to prevent boatmen

loitering, and pinching his lordship's game.

The favourite method was to have grain which you

soaked in a bit of rum

and the person who went ahead to get the locks ready happened to

drop a few grains down, soaked in rum,

and then when the boats came a few minutes later,

there would be some very drunk pheasants lying on the tow paths,

which could be picked up easily.

As well as having to fork out to placate landowners,

the Grand Junction's investors were also

worried about the spiralling costs of some of the engineering work.

A long cutting needed to be made at the canal's highest point,

the Tring summit in the Chilterns.

In Northamptonshire, geological problems meant that work on the

Blisworth tunnel had to be abandoned several times after bad flooding.

Not only were there these engineering problems,

but there was also the Napoleonic wars going on in the background,

which put the price of everything up, so, consequently,

the canal was costing a great deal more than had been bargained for,

and the company had to go back to Parliament on more than one occasion

for further Acts of Parliament to authorise raising extra capital.

All of this extra expenditure meant the canal's final costs, originally

estimated at £400,000, eventually came in at around £1.5 million.

Until it was overtaken by the Manchester Ship Canal in 1887,

the Grand Junction remained

Britain's most expensive canal project.

Apart from the troublesome Blisworth tunnel,

the canal was largely completed by 1800.

It knocked 60 miles off the originally longwinded route

via the Oxford Canal, and it was far more reliable.

With most of the canal open for business

by the turn of the century, the Grand Junction soon replaced

the Oxford as the main trade route between London and the Midlands.

Places like the Marsworth Locks near Tring would have been

incredibly busy in the early 1800s.

Narrow boats heading for London would be loaded with coal,

agricultural produce and manufactured goods.

They'd pass boats that were heading up to the Midlands

and they were loaded with tea, sugar and spices from the London Docks.

The Grand Junction, like most canals, made most of its revenue

from tolls levied against goods carried up and down the waterway.

It very much depended on what you were carrying and how much of it.

Boats would be gauged by water displacement to see how much

toll to levy.

Coal was the most expensive item on the canal

because it was the most profitable, at three half pence a tonne.

Another busy spot where cargos were assessed

and tolls paid was the Brentford Gauging Lock.

In fact, the whole Brentford district grew up as a direct

result of the canal's construction, with wharfs, warehouses,

freight sheds and workshops all springing up to serve the new route.

But for the Grand Junction to reach its full potential,

a final piece of the puzzle would be needed.

And once it was in place, it would

allow London to directly link up to the national canal network.

The Grand Junction Company had always had ambitions to build

a connection from the main line at Southall to Paddington, which was

close to the heart of the capital

and connected by road to the City of London.

The 13 mile Paddington Arm opened in 1801,

terminating here at Paddington Basin.

Paddington was a very insignificant little village,

just outside London, but the canal brought with it warehouses,

wharfs and bustling industry and, of course,

it was also the natural site some 40-odd years later

for Isambard Kingdom Brunel

to site his terminus of the Great Western Railway.

So you can say really that the Grand Junction Canal was

the making of Paddington as an important suburb of London.

One of the firms to build warehouses

and wharves at Paddington was the carrying company Pickfords.

Pickfords first began using canals in 1776

and it was a safeguard to their main wagon and horse transport

between Manchester and London

cos they were wanting to see how this newfangled

mode of transport would actually work out.

Within 20 years, Pickfords had grown from four barges to over 28.

As they started the 19th century, it was up to nearly 80.

For Pickfords, the arrival of the Grand Junction

was a godsend, as it meant they no longer had to use

the Oxford Canal as their main carrying route down to London.

The Oxford Canal Company were quite greedy

and were causing Pickfords problems

because they were wanting higher leases on warehouses, on wharves.

The Grand Junction Canal was a saviour.

It was quicker, it was more direct, and when the Blisworth Tunnel

was built, straight to London, no unloading.

And they had priority at the locks.

Barges would be stacked up to go through.

Flyboat comes along, you had to give up your place,

so Pickfords had the priority going through.

They could be in London within two and a half days

from the North of England.

Nobody could beat it and that was because the Grand Junction Canal

gave them a direct route and also a basin

in the heart of London, at Paddington.

Of course, there was no point having a fast canal route

if the delivery system across London wasn't equally efficient.

Pickfords had opened up not one,

but two warehouses through the basin.

The barge would come in between two and four o'clock in the morning.

All its paperwork, its manifest,

had already been sent ahead of the barge so they knew what was coming.

There might be 150 consignments on that barge, each consignment

would come off, they'd look at it, "Oh, yeah, that's for Hammersmith."

It would be in loading bay 1 or loading bay 4,

wagon would be waiting.

If it arrived between two and four, by five, it was on its way,

by eight o'clock, the same wagon had delivered everything

and was back for its second load.

Now, I doubt if many parcel carriers could beat that today

and when you consider the technology,

which was canals, horses, wagons,

it was pretty slick.

Even with the addition of the Paddington Arm,

the Grand Junction wasn't a success in its early years of operation.

A letter from 1806 to the Gentleman's Magazine

complained about "the consequences of ill-judged speculation".

"From the pressure of the times, many widows and young ladies,

"whose fortunes, with the hopes of extraordinary interest,

"were vested by their friends in the stock of this company,

"have been obliged to sell their shares

"at a very great disadvantage and loss."

In the short term, the Grand Junction may have been

the ruin of some, but over the next years, the canal's fortunes

improved and its revenue and share price began to climb steadily.

Despite a sluggish start, the Grand Junction soon began to hit

its stride and repay the confidence of the investors who risked so much.

By 1810, there were nearly 350,000 tonnes of goods moving

through London, with equal amounts coming in and out of the capital.

In 1819, it was noted that "the annual gross revenue of the canal

"amounted to the sum of £170,000.

"It possesses 1,400 proprietors

"and its shares of £100 have recently sold at up to £250 each.

"Many of the first capitalists of the kingdom are its proprietors

"and its usual routine of business is so conducted

"as to give satisfaction to all who are connected with it."

In the long run, it was to prove not the most successful canal,

but a very successful canal,

and it paid a steady dividend from the early 19th century

until it was taken over by the Grand Union Canal Company in 1929.

And, in fact, it still existed as a property company

owning property in Paddington until 1972.

As well as collecting dividends, shareholders could wheel and deal

their stocks on a bigger scale once the London Stock Exchange

was formally established in 1801.

During the mid-18th century, their markets were local, there was limited

flow of capital, hence prospective canals depended on local money.

But by the 1790s, you've got lots of shares in canals being traded

in and around the Bank of England, and round Exchange Alley.

Of course, the Stock Exchange isn't officially regulated till 1801

and by 1811, half the companies on the Stock Exchange

are canal companies.

The Grand Junction shareholders may have profited financially,

but the canal also brought benefits to the nation as a whole.

It was a good investment for the country

because the boots for Wellington's army came from Northampton

and the guns that fired at Trafalgar passed along this canal.

The canal's public champions were both

honoured for their work in helping create the Grand Junction.

The Marquess of Buckingham had his coat of arms

incorporated into the company's official seal,

while William Praed had a major street named after him

in Paddington,

marking the crucial role he played in the growth of the area.

For some investors, the era of Canal Mania brought hefty returns,

but not all the canals given the go-ahead during those years

were as successful as the Grand Junction.

The Hereford and Gloucester Canal never paid a dividend.

The Grand Western Canal didn't pay out any until the 1850s.

And the Dorset and Somerset was abandoned during construction

and never completed.

There were more losers than winners in canal investment.

The early canals were the most successful

because they had a proper rationale.

They were promoted by industrialists, merchants, and in the case

of Bridgwater, a landed gent who owned a lot of coal mines.

The key area is the industrial Midlands and the North West,

and it's here where a network is built up around bulky items

like coal, salt, limestone, Cheshire cheeses.

However, the later canals, built on less firm grounds

often without a proper purpose, ended up losing money

or never getting built and obviously the investors there were doomed.

Ultimately, the mania for canals

were eclipsed eventually by the railways.

The Grand Junction was profitable until the 1840s

when the railways started to muscle in on their business.

Many shareholders sold their canal shares to invest in these railways,

resulting in a similar period of speculative mania.

The dawn of the railway age began the long decline of

the Grand Junction and the rest of Britain's industrial canal systems.

The new railways certainly brought a swift end

to Pickfords' slick canal operation.

From 1840-1847, in that seven year period,

Pickfords went from having over 100 barges, 400 horses, down to nothing.

The reason being, railways,

and Pickfords knew this was the way to go.

But to be involved with the railways,

the railway company said, "You scrap every other mode of transport,

"we will have no competitors."

That meant no canals. That was the end.

The canal age really represents a milestone on the road

to financial development for the modern age.

In previous years, major schemes had to be invested in

by aristocratic people borrowing from each other, very small numbers.

Now, an emerging middle class were able to invest themselves

in large schemes that required huge amounts of money to get going.

Margaret Thatcher famously in the 1980s tried to create

a stockholding democracy by privatising nationalised companies,

particularly the utility companies

and wooing people to invest in them,

thus having a stake in the country, and that's the same mentality

we see, I think, in the late-18th, early-19th century,

a shift away from having to have fixed property, land,

which had traditionally been the way,

to now having a stake through investment,

from investment in projects like canals and, later, railways.