Capitalism and Commerce Railways: The Making of a Nation

In the 1800s, rail workers were changing our landscape

and creating new powerhouses of industrial engineering.

Railways were the making of towns like Derby, Crewe and Swindon,

as they became key players in the transport revolution.

The expanding network was at the heart of modern, powerful

Victorian Britain, a Britain bursting with energy and confidence.

Railways were transforming virtually everything.

From where we live, to how we work,

from what we eat, to how we spend our leisure time.

They gave us a new shared identity and culture.

It was a gold rush, and there was money to be made and lost.

The railways were playing a key role in our economic prosperity,

but they were also profoundly affecting the WAY we do business,

something that continues to this day.

Slicing through the Derbyshire Dales, this line,

now operated by Peak Rail, dates back to the 1840s.

It was part of a route which once connected Matlock to Manchester.

Now a heritage railway, it takes day-trippers on a journey,

to a bygone age of steam.

It was one of hundreds of rail routes constructed

in the 19th century, part of a new, exciting transport network,

reinvigorating the nation's economy.

As the Industrial Revolution surged ahead,

it consumed more raw materials than ever before.

Many of the early railways were funded by local businessmen,

who wanted to move their goods more quickly than canals

or turnpike roads would let them.

The most important was coal,

but where it was mined wasn't where it was needed most.

The Foxfield in Staffordshire is a case in point,

another of our great heritage lines,

originally built in the late Victorian period to transport coal.

But as the early network began to grow,

it became clear that transporting passengers was going to be

an equally important source of revenue.

The publicity surrounding the opening of the ground-breaking

Liverpool and Manchester Railway in 1830,

and the returns on the investments,

really made the nation sit up and take notice.

Over the next few years,

the main spines of a national rail network were laid down.

Conditions were ripe for investment on a wider scale

than just local business interests.

The stage was set for a frenzy of public investment and speculation

in the mid-1840s. This was later christened Railway Mania.

So, Jane, there had been investment manias before, hadn't there?

Like the tulip bubble, and of course, the investment in canals,

but what made railways different?

Well, it was on a completely different scale.

People were really attracted by those high rates of return that

they could get from buying shares in the early railway companies.

And those big branch lines, they delivered quite high

rates of return, particularly compared to government stock,

which the interest rates were low.

TRAIN WHISTLE TOOTS

And unlike the tulip mania or the dot-com bubble,

railways left us with something really palpable -

a transport network that drew the whole economy together.

This Punch cartoon, entitled The Railway Juggernaut of 1845,

nicely captures how Victorian Britain

was caught up in Railway Mania.

The locomotive, called Speculation, is seen ploughing through crowds

of investors, literally throwing themselves, with money bags,

under the path of the loco.

A single share in a canal company was relatively expensive,

and out of reach for many.

The new railway shares could be bought for just a few pounds,

making them much more affordable.

So, basically, for people on small incomes,

this is an accessible way to invest, isn't it?

Spinsters, widows, people with small bits of money,

hoping to make a return, but in this way

also contributing to an important infrastructure project,

that is going to be a platform for the growth of the British economy.

Capitalism was getting faster, and trading in railway shares

became the lifeblood of not only the London Stock Exchange,

but a host of smaller exchanges opening in provincial towns.

It had never been easier to buy railway stock.

Places like this, in Nottingham, allowed people

to trade shares locally. They often used the new technology

of the telegraph to transmit information across the country.

As well as regional exchanges, a huge back office industry emerged

as part of the new railway gold rush.

Printers fulfilled the demand for fancy engraved share certificates.

The press thrived from railway company advertisements.

There were the beginnings of the financial press we know today.

By 1845, there were no fewer than 15 weekly railway journals.

Thanks to all this public interest and investment, by the mid-1840s,

the railways completely dominated the country's economic activity.

Railway Mania reached a peak in 1846,

when 272 Acts of Parliament were passed,

authorising 9,500 miles of new track.

Not all of these made it off the drawing board.

Some replicated existing lines, some were fanciful,

and others were downright fraudulent,

but nevertheless, thousands of miles of track were built

as a result of the mania.

But there was never a grand national plan.

From the start, Parliament authorised new lines,

but it was private initiative that drove the railway boom.

At the beginning, these were local projects,

where local people could see them being built,

want to invest in them,

they would benefit from the building of these railways,

in terms of passenger travel, in terms of trade and commerce.

So they'd be investing in what they saw as local projects

that would benefit their local area.

'Welcome to Derby station.'

The upshot of all this was that train companies evolved

in something of a haphazard manner.

Here at Derby, three train companies shared the same station.

The North Midland Railway ran trains between Derby and Leeds.

Midland Counties Railway connected Nottingham and Derby

with Leicester and Rugby.

And the Birmingham and Derby Junction Railway

offered another route towards the capital.

From the start, there was an intense tit-for-tat competition

between the two southbound routes of transport,

especially over traffic to London.

The outcome of this rivalry was that both the Midland Counties

and the Birmingham and Derby started a price war,

and slashed their fares to the bone.

They then became strapped for cash,

paying out minuscule dividends to their shareholders.

The network was crying out for rationalisation.

After its initial unrestrained, haphazard growth,

order was desperately needed,

if only to increase profitability and efficiency.

One of the men who would make this happen was George Hudson,

a man who had come to be known as the Railway King by his admirers,

and the Railway Napoleon by his enemies.

After meeting George Stephenson, he became obsessed with the idea

of starting a railway empire,

and soon set out on a career of acquiring

as many railways as he could.

So George Hudson, in the early days, he's buying up all these companies.

He's a real empire builder, isn't he?

He is. He feels he can achieve anything.

He also feels, with railway companies coming

and rising up everywhere, he can unify them.

This is really a quite revolutionary step, isn't it?

Getting all of these companies to work together?

Completely. I mean, it was chaos.

The beginning of the railway revolution was utter chaos,

and somebody needed to stamp some uniformity on it.

Hudson, by the sheer force of his personality,

was exactly the right man to do that.

He created a tremendous railway empire within about ten years,

an incredible achievement.

In 1844, Hudson oversaw the merger of his own company, North Midland,

with the two others based here in Derby, and by doing so,

dangled the prospect of big profits to the mesmerised shareholders.

And so, the Midland Railway was created.

Hudson was its new chairman,

in charge of track stretching from Leeds in the north,

to Rugby in the south, with Derby as the headquarters.

This is the former carriage and wagon works here at Derby.

It's currently owned by Bombardier,

who make the trains for Crossrail and Gatwick Express,

and it's a reminder of just how much Derby and the railways

owe to each other.

So by the 1840s, mechanical engineering was taking off,

and it was all happening here in Derby, wasn't it?

It's all happening right here.

The epicentre of that is the railways itself.

You've got the three railways that have merged to form the Midland,

and they are producing a huge number of locomotives at this point,

mostly refits and refurbs of existing locomotives,

cos ultimately what they've done is they've inherited

a real hotchpotch collection of locomotives.

They're having to fit them out and standardise them to make them work.

The key character in this is Matthew Kirtley,

right at the heart of this.

He understands that if you're going to be able to run

a railway network of this scale,

then you're going to have to do it through a bit of standardisation.

So Kirtley's obviously a key character for the company,

but it's not exactly an accident

that the works are here in Derby, is it?

It's not. If you think about where we are, geographically speaking,

we are right in the middle of the country.

If you actually look at the railways themselves,

this is one of the principal junctions.

This is how people are actually getting from Yorkshire into

the Midlands, to Birmingham, and for onwards travel down to London,

So here it is in Derby, at the centre, best place to get to London,

best place to get to Yorkshire,

and the best place to start building and refurbing

your own carriages and locomotives.

By the early 1840s, Midland under George Hudson was going great guns.

Business was booming,

and shareholders were being rewarded with juicy dividends.

So what could possibly go wrong?

The railway companies are expanding so quickly, so rapidly,

the law just can't keep up with them.

Not at all. The Railway Act of 1844 attempted to do so.

It was framed by William Gladstone,

possibly the greatest politician and statesman of the 19th century.

Hudson felt, "Let private enterprise drive this revolution."

He may have been right but, of course, that enabled him

to make an awful lot of money out of it, sometimes by dubious practices.

There was some limited state intervention

to improve safety standards,

and open up cheap trains to the working classes,

but capitalists remained firmly in the driving seat.

George Hudson was one of them,

but his business methods were built on shaky foundations.

He began to pay dividends to shareholders

from his company's capital, rather than the profits.

This gave the impression his businesses were more successful

than they actually were.

With railway financing evolving

faster than the law's ability to regulate it, trouble was brewing.

By 1845, a dangerous bubble was forming in the railway sector,

and the actions of unscrupulous empire builders like Hudson

were only inflating it further.

The price of railway shares was driven up unsustainably,

until bad harvests and rising food prices, along with a steep rise

in interest rates, led to a rush to sell shares,

bursting the bubble and precipitating a crash.

Once the banks started calling back in their money,

saying they were applying the credit squeeze, it was ordinary,

small-scale businesses that went out of business.

I think they were really adversely affected.

The wealthy had a cushion.

And if you had land, you could earn money off the land.

If you were an ordinary investor,

or an ordinary trader, there was more vulnerability there,

to booms and bust.

Speculators found themselves landed with huge debts,

and unsalable shares.

It led to bankruptcies, imprisonment for debt, even family break-ups.

There was one suicide found in a London park,

whose pockets were stuffed with share certificates.

A contemporary chronicler wrote,

"It is the conviction of those who are best informed

"that no other panic was ever so fatal to the middle class."

Entire families were ruined.

The small investors who had been drawn into the market,

who naively thought the railway boom would continue forever,

they were really taken aback, they were shocked by

the way in which the value of their shares decline.

So that somebody like a clergyman's daughter, Charlotte Bronte,

she and her sisters invested their small inheritance in railway shares,

and they practically lost everything.

Investors lost nearly 80 million in Hudson's downfall.

He was branded by Lord Macauley "a bloated, vulgar, insolent,

"purse-proud, greedy drunken blaggard."

The more Hudson came under scrutiny, the more people discovered that he,

like many others, was doing dodgy deals,

but it would be George who paid the price.

So, Robert, this was one of George Hudson's favourite houses,

-but it had to go, didn't it?

-It had to go, and it broke his heart,

but as his fortunes waned and the creditors

came knocking at the door, this had to go.

When things go wrong it's so easy to blame him, but now we're left

with quite a lot of blame, but a lot of legacy as well.

Huge legacy. He built, within ten years,

a third of the UK's rail track, which is amazing.

His energy and vision were fantastic, and one wonders,

if he hadn't existed, how the railways might have evolved

in the 1840s, cos they needed somebody

with the vision, commitment, and amazing energy that he had

to drive them forward.

George Hudson may have been seen as an embezzler and a cheat,

but his misdeeds contributed to a much-needed overhaul

of the way all railway companies operated.

Sometimes, it takes a scoundrel to shake things up.

Despite their size and complexity,

railway companies were still crude affairs,

and the model of a business as we now know it -

with departments, directors and consistent book-keeping -

was only starting to develop.

So we're going to have a look at some documents

at the Midland Railway Study Centre...

-Fantastic.

-..which is great,

cos most people don't get to see this kind of thing.

Today, we expect big companies to be called to account by auditors for

their financial dealings, but that wasn't always the case, was it?

We take that for granted now,

but back then, there was very little known, really,

about keeping correct accounts.

The person who probably led the way

was Mark Huish, who was your typical Victorian number cruncher -

lived and breathed figures.

Huish deliberately sets out to write the figures down,

in black and white, very clearly, without any fiddling,

so that you would be convinced that this is a correct statement

of the accounts of this railway company.

So this is really the start of big, professional companies

for accountants, like William Deloitte?

Yeah, and Price Waterhouse,

who became probably the largest accountants during this period,

and survive today. If you're looking for the historical origins

of terms like accountability, transparency, visibility,

it's precisely coming out of the re-form of the accounts

around the railway companies in the mid-19th century.

As well as giving work to legions of accountants, the railways helped

to give birth to a new class of professional managers,

who were needed to run these complex organisations.

These were often ordinary men who climbed the ladder.

Promotion through rank was one of the great changes

wrought by the railways.

This practice has continued into the modern era,

and Derby's former School of Transport,

the railway's first staff college, still instructs workers today.

We like the look of it, we invested a lot of time and effort in that.

This training centre has been in operation for over 70 years,

and people are still being trained here today in practical skills,

but also in management.

People could start on the railways as porters or as office clerks,

and they could develop their skills, come to training centres like this,

and become managers in other parts of the country.

Throughout the 1850s,

trading in railway shares continued to dominate the country's

stock exchanges. Yet in terms of profits for the shareholders,

some mining and textile companies now offered better returns.

After the crash, railway shares continued to be popular,

-didn't they? Why was that?

-Railways continued to be built.

Thousands of miles of line.

A lot of them were very successful,

so there was a really hard-headed investment decision here.

If you invested in government stock, government bonds,

there wasn't such a high rate of return.

Railways were still a profitable investment and less risky

than sending your money to a gold mine in South America, for example.

Post-Hudson, the Midland Railway grew in strength.

Under new management and improved business ethics,

it was now one of the major railway companies in Britain.

Its rivals - the London and North Western, the Great Northern,

and the Great Western - had ambitions of their own.

Each one was determined to expand and get the upper hand.

By the 1860s, the Midland Railway was in a strong position.

Its Derby HQ was the junction for the two main routes

from London to Scotland.

But the growing rivalry with the London and North Western Railway

was heating up.

The L&N had the tracks north, and the Midland, to the south,

and there was a problem deep in the Yorkshire Dales.

Disputes and stand-offs between railway companies were common,

but as battlegrounds go, this one was on an epic scale.

Things came to a head here in Ingleton,

where the two rivals just couldn't reach an agreement

on sharing the station and the tracks heading north.

Passengers were forced off their Midland train, whatever the weather,

to traipse across this vast viaduct with their luggage, on foot,

to wait for the London and North Western service to pick them up.

Eventually, a compromise was reached, so that passengers

could stay in their carriages and continue their journey.

But, because of the rivalry and mistrust between the companies,

the line never reached its full potential.

The Midland board decided they needed their own

separate route to Scotland.

Their intention was to build a new line from Settle in North Yorkshire

to Carlisle in Cumbria.

73 miles through extremely tough terrain,

and these are some of the original plans.

So this is a mega construction for the railway company,

out here in such a remote place.

Not half. This is the ultimate, the biggest of the viaducts,

but the biggest of 22 like this that there were along the line.

And there's hardly a mile

of this 72-, 73-mile-long railway between Settle and Carlisle

that hasn't got some major structure on it -

a bridge, a viaduct, an embankment, a cutting.

Even looking at a photograph like this, that shows part of the

construction, it also shows in the background some of the, I suppose,

the support, the infrastructure of a place like this,

bearing in mind how remote it is,

how far it is away from smaller towns nearby.

We don't know for sure just how many people worked on the whole line.

But in this particular area,

we know that there were about 2,000 people living and dying

during the six or seven years it took to build this amazing structure

and the nearby Blea Moor Tunnel.

Just about every churchyard has got its navvy graves, navvy memorials,

but 200 we do know died here and are buried in the tiny churchyard

at Chapel-le-Dale, just across the near horizon here.

Roughly one a week.

And the main killers were smallpox and cholera.

This burial list shows some of the dozens of men,

women, and children, who died during the construction

of the Settle to Carlisle line.

In fact, the churchyard was so overcrowded, that in 1871,

Reverend Smith applied to the Midland Railway for financial help

in extending the burial ground.

All industries need workers.

The navvies perhaps don't always get the credit they deserve.

The Ribblehead viaduct remains an impressive monument

to the Midland's commercial and engineering ambitions.

Absolutely stunning, in its landscape here.

Sort of like St Paul's Cathedral is to London,

this is to the Yorkshire Dales.

The Settle to Carlisle line opened for freight in 1875,

and for passengers the following year. For the Midland Railway,

the final link in the chain was complete,

and it was now in a commanding position.

By 1876, the company operated more than 1,500 miles of track.

It owned a quarter of the country's engines, 3,000 coaches,

and 33,000 wagons.

As the larger railway companies continue to expand their networks

and power bases, the state continued with its light touch approach.

But with the advent of the First World War in 1914,

everything changed.

The state largely took control of the railways

in order to facilitate the movement of troops and supplies.

When the fighting ended, the government used compulsory mergers

to create the Big Four, and the Midland became part

of the London, Midland and Scottish Railway.

On the 1st of January 1948,

a quarter of a century after it was first formed,

the London, Midland and Scottish became part of British Railways.

Nationalisation was the end of an era for all our railway companies,

yet the Midland's legacy lives on,

through its former workshops and magnificent stations.

In the glory days of the 1860s,

the Midland Railway decided it needed its own terminus

in the capital to help it cope with the increase in coal and passengers.

The result was St Pancras, opened in 1868.

And it was described at the time

as one of the most elegant constructions.

Elegant, in a way, sells it short

because it's magnificent, you might say.

This is the largest clearspan structure that had yet been produced

anywhere in the world by quite a long way,

and that's just the train shed part.

Because, at the other end, and also wrapping all around us,

in the form of red brick and stone, are the station buildings,

including, at the far end, the magnificent Midland Hotel,

designed by George Gilbert Scott.

This is a magnificent building, by any standards.

The historians will always debate

precisely what impact the railways had on our national economy,

but there's little doubt that we were world leaders in the field.

Railway shares really developed the investor spirit in the UK.

So it was a training ground for financial markets,

also the training ground for investors.

It was an important step towards shareholder capitalism,

where the middle classes were encouraged to speculate

on the stock exchange,

something that politicians like Margaret Thatcher

were so keen to emulate when the public snapped up shares

in British Telecom and British Gas.

During a few decades in the 19th century,

the railways drove up excellence in engineering

and developed accountancy, book- keeping, and management structures

that remain with us today.

The railways revolution transformed how we did business in Britain,

and right around the world.