The aristocratic elite: Landowners and financiers: a narrowing circle?

Landowners complemented their estate business with interests in industrial and commercial ventures. This diversification was eased by the already close business links between landowners and City financiers. City financiers were also important in their own right as promoters if business ventures, especially railway companies. The railways were giant enterprises whose capital requirements outweighed those of all other businesses together. London bankers, especially Glyn Mills, acted as active promoters for railway companies and brought together the masses of ‘anonymous’ investors, many from the professions and many ‘widows and orphans’, who provided much of the railway capital.

The railway boom in the 1840s led to a situation where the 15 largest companies controlled 75 per cent of railway revenue and by the boom of the 1860s the top four companies had 44 per cent of revenue. As a result, from the 1860s many landowners began to take portfolio investments in the big main-line companies, a move away from their previous commitment only to local lines. The railway booms brought together some of the interests of the financial community and the landowners. But the development of railways was also to have an indirect impact on industrial funding. Limited liability had rarely been thought necessary by industrial entrepreneurs but, as the capital requirements of some industries increased, the trust and the partnership gave way to the joint-stock company. This enabled manufacturers to draw on a wider pool of capital and to provide for the various members of their families by issuing shares to them. By the mid-1860s about a thousand new joint-stock companies were being registered annually, though the majority were still run as partnerships. The spread of railway shareholding encouraged the growth of the London and provincial stock exchanges and so made it easier for expanding industrial enterprises to raise capital and for landowners to invest.

Concentrating industrial power

The move towards joint stock capital was associated with an increase in the levels of economic concentration. In the 1880s the hundred largest industrial firms accounted for less than ten per cent of the total market. However, a spate of company amalgamation led to greater concentrations in the 1890s as the increased merger activity outpaced the growth of the market. Companies were floated on the stock exchange and might then grow by taking over their competitors; or rival firms might join together to float a common holding company. The families whose firms were floated or merged at this time often retained the ordinary, voting, shares for themselves and allowed debentures and non-voting shares to be sold to the wider public. This, family control could be maintained on the basis of a relatively small capital investment. The flotation of firms allowed capital to be raised from outside the family circle; and the joint-stock form allowed family wealth to be diversified and so made more secure.

Large amalgamation of family firms occurred in a rapid burst between 1898 and 1900, but the rate of flotation and merger remained at a high level until 1914. These were, however, often hamstrung by attempts to maintain the autonomy of the constituent family firm, leaving the large firms as merely holding companies with no real control over their subsidiaries. The desire to maintain family control was paramount and could lead to difficulties in managing the newly created company. For example, in the fusion of 59 firms that produced the Calico Printers’ Association in 1899, each of the 84 directors on the board was determined to safeguard the interest of his original company that, in the majority of cases, was still under his management. Because of this situation of family loyalties and priorities, those larger companies that succeeded in adopting a more centralised structure were generally either those in which one constituent firm was considerably larger than the others, or those in which a particular family managed to subordinate its fellows in the struggle for control. The families who lost out in the struggle for the fewer positions of control in the amalgamated firms were faced with the choice of either retiring into land or politics (the gentleman’s route) or moving into new business ventures (the so-called player’s route).

Families that wished to leave business often decided to sell out to a company promoter prior to the stick exchange flotation. These families sometimes retained a stake in the firm but were not involved in active control. These promoters were often keen to recruit peers to the board of companies of the companies that they floated, feeling that a ‘lord on the board’ would help the sale of shares. From the 1870s landowners joined the boards of joint-stock companies and by 1896 a quarter of all peers had directorship. Many of these men would have been invited on to a board for decorative purposes but many landowners found their directorships to be a significant supplement to their income. They may even have performed a useful function for the companies since the managerial problems of large firms and the need for delegated administration was similar to those faced on their estates. Companies may even have benefited from the ‘managerial’ expertise of the landowners.

A concentration of wealth?

The declining return of agriculture as a proportion of the returns of the economy as a whole was aggravated by the agricultural depression of 1873-1896. Smaller landowners were hit far more severely than the larger landowners who had been able to diversify into non-agricultural activities. The squeeze that this exerted on the smaller landowners exacerbated the growing awareness and criticism of the accumulation of wealth in land, commerce and industry. The result of this controversy and criticism was the establishment of an official investigation to scotch the claim that the bulk of British land was owned by 30,000 people. In fact this backfired: the investigation discovered that the land was owned by a much smaller number of people.

The results of the survey for 1873 were published in the Returns of Owners of Land (the ‘New Domesday Book’) and, although there is some confusion in the various summaries of the Return, certain conclusions about the ownership of land are clear. First, 80 per cent of land was owned by 7,000 people, of whom 4,200 in England and Wales and 800 in Scotland held 1,000 acres or more. Secondly, among these people a total of 363 held 10,000 acres or more, 44 having 100,000 acres or more. Most of the largest estates were in Scotland: there were a total of 35 estates larger than 100,000 acres, of which the 25 Scottish estates accounted for a quarter of the Scottish land. Thirdly, in total the large landowners held about 24 per cent of the land, the smaller rentiers held about 55 per cent and owner-occupiers held a further 10 per cent with the Church of England and the Crown holding a similar amount. Finally, this national picture was repeated at local level: in East Anglia, for example, 350 people owned 55 per cent of the agricultural land in Norfolk, Suffolk and Cambridgeshire.

It is also possible to reach some conclusions about income from land. Of the 2,500 people with an annual rental income of £3,000 or more in 1873, 866 received an income of £10,000 or more and 76 received £50,000 or more. Sixteen people received a rental income in excess of £100,000, the largest incomes going to the Dukes of Norfolk and Buccleuch and the Marquess of Bute. Any attempt to construct a list of Britain’s richest people is complicated by the fact that there was not a perfect correlation between income and acreage. Only 7 people had both 100,000 acres and £100,000 annual income: the Dukes of Buccleuch, Devonshire, Northumberland, Portland and Sutherland, the Marquess of Bute and the Earl Fitzwilliam. The survey did not extend to the rental income derived from urban rents and the wealth if men such as the Duke of Westminster were underestimated.

To identify Britain’s richest landowners more closely it is necessary to include the Dukes of Norfolk and Westminster, who had large incomes from relatively small estates and six men with massive estates though receiving less than £100,000 rental: the Duke of Richmond, the Earls of Breadalbane, Fife and Seafield, Alexander Matheson and Sir James Matheson. These fifteen people constituted the core of the British landed class. The continuing overlap between the rich and the peerage is obvious. Of the 363 people with both £10,000 income and 10,000 acres, together holding almost a quarter of Britain’s land, 246 were members of the peerage; and a further 350 peers had smaller estates.

Landed wealth-holders 1809-1899

	1809-1858	1858-1879	1880-1899
Millionaires	75	33	32
Half-millionaires	150	50	n/a
Total	225	83	--

 

This table shows the estimate by Rubinstein of the numbers of landed millionaires and half-millionaires -- that is those leaving land valued at £500,000 or more on their death. It is clear that the number of landed millionaires fell considerably between the first and second half of the century. It is, however, important to recognise that the holding of land through settlements and trusts tended to result in an underestimation of landed wealth in studies based on land held at death.

The position of landowners in relation to wealthy merchants and industrialists was deteriorating significantly. In his researches for Capital, Marx tried to assess the number of industrial millionaires by analysing the returns for Succession Duty so as to discover the number of personal estates of more than £1m. He found no deceased millionaires for 1815-1825, eight for 1825-1855 and in the three years 1856-189 he found four. More recently Harold Perkin has estimated that there were, in 1850, 2,000 businessmen with profits of £3,000 or more; 338 of these people received £10,000 or more and 26 £50,000 or more. In 1867 the wealthiest 0.5 per cent of the population received 26.3 per cent of the total income. By 1880 the number of businessmen with Schedule D profits of £3,000 or more had risen to 5,000 of whom 987 received £10,000 or more and 77 £50,000 or more. By 1880 the commercial and manufacturing classes had overtaken the landed classes in economic terms.

Top British wealth-holders outside land 1809-1914

 

	1809-1858	1858-1879	1880-1899	1900-1914
Millionaires	9	30	59	75
Half-millionaires	47	102	158	181
Total	56	132	217	256

 

The financial sector consistently accounted for between 20 and 40 per cent of all non-landed millionaires. Within the manufacturing sector, textiles accounted for about 10 per cent (rather more in the earlier period) and metals accounted for the same percentage in both of the earlier periods and then fell away. It can be concluded that both of the main industries of the industrial revolution were well-represented among millionaires. In the later periods the food, drink and tobacco industries together accounted for about 20 per cent of all non-landed millionaires, and from 1858 the distributive trades accounted for one-tenth.

Conclusions

The wealthy men of land, commerce and manufacturing were drawing closer together during the Victorian period, though landowners still tended to deprecate merchants and manufacturers as ‘middle-class’ and concerned with ‘trade’. This status exclusion was made easier by the existence of a vast number of clerks, shopkeepers and tradesmen who were oriented towards the commercial and manufacturing classes and appeared to form a continuous social category with them. In fact, the economic gulf between them was immense.

It was the development in the scale of business activity and the emergence of the joint-stock company that brought into existence a class of salaried managers and administrators who occupied an increasingly important position in the class system. These ‘professionals’ were distinct from manual workers by virtue of their higher earnings, the ‘career’ nature of their work and their participation in the control and surveillance of the labour process but they were distinct from the capitalists themselves. They constituted a loose middle stratum below the main areas of privilege, but enjoyed superior life chances to the majority of the population. They were, however, dependent on the business and private actions of manufacturers and merchants and were also direct beneficiaries of the new form of property that the joint-stock company represented. Yet with the landowners, manufacturers and merchants, the intellectual property of the professions represented an important shift in the definition of property in late Victorian Britain.

The aristocratic elite

Between 1800 and 1914 manufacturing industry grew steadily in importance to become the dominant element in the economy. These changes were reflected in the structure of class relations. The altered significance of agriculture in relation to industry tilted the balance of power in favour of the manufacturing class and the central position of Britain in the international flow of commodities and money ensured the continuing importance of the financiers and merchants of the City of London.[1] The landed interest was forced to come to terms with its changed circumstances.[2] However, by 1900 the landed, manufacturing and commercial classes had moved closer together in economic, cultural and political terms. Though they did not form a unified social class, these three classes could no longer be considered as totally distinct from each other and were, to some degree, on the verge of forming a single propertied class even though differences in their market situation continued to separate them.

The City, the lords and the boards

The nineteenth century saw the development of a closer relationship between property owners whether in agriculture or industry. The distinction between the two had never been complete, even in the eighteenth century where successful industrialists bought themselves landed estates and landowners exploited the mineral reserves beneath their land. It was, however, changes in the banking system in the second half of the century that stimulated a closer relationship between the two groups. In 1830 three different types of bank together formed the British banking system. At the heart of the London financial system were the private banks such as Hoares, Childs, Coutts and Martins, that had often developed out of older goldsmith businesses. The private banks of the West End tended to have many landed clients and were often heavily involved in the long-term mortgage business of the landed class. By contrast the private banks of the City itself were mainly concerned with the provision of short-term credit for merchant firms and, to a much lesser extent, manufacturing concerns. The Bank of England and, perhaps less importantly, the Scottish chartered banks were concerned with the management of government finances but also carried out some private banking transactions for the merchant houses that comprised its major shareholders. The Bank was by no means a central bank that regulated the rest of the banking system; its main role was to facilitate the formation of the financial syndicates that purchased government stock. The third type of bank to be found in Britain was the country bank, a private bank located outside London. These often arose as adjuncts of mercantile concerns and had strong banking links with both local landowners and industrialists. Though their businesses were highly localised, the country banks were tied into the national system of capital mobilisation through their use of London agents and correspondent offices, generally one or other of the London private bankers.

Major changes in the financial system began with the repeal of the ‘Bubble Act’ in 1825 and the two Companies Acts of 1856 and 1862.[3] These changes in the law made limited liability and transferable shares more easily available to businesses and did much to stimulate the establishment of joint-stock banks in London and the provinces. The country banks were often involved in the formation of joint-stock banks, a number of these being in London. Agency arrangements between London and country banks were, in many cases, formalised in mergers to form large joint-stock banks. The tightening up of the banking system, especially in the 1844 Act, enabled it to become more closely involved in capital mobilisation: agricultural wealth filtered through the country banks to London from where the money went to finance the industries of the north and midlands and to finance landowners’ mortgages.

By the 1860s and 1870s the City of London had become the hub of an international monetary system, with a particularly important group of ‘merchant banks’ specialising in the financing of foreign trade and in funding foreign government loans. Such prominent merchant bankers as Rothschild and Baring, together with others such as Goshen and Hambros, were generally based around the businesses of émigré merchants and bankers and often continued with their merchant businesses alongside their banking activities. The merchants and merchant bankers of the City formed a tightly integrated group with numerous overlapping business activities: they joined together to syndicate loans, they dominated the board of the Bank of England and they coalesced to run the major dock, canal and insurance companies. This City faction was united through bonds of business, kinship and friendship and its cohesion was enhanced by the frequency and informality in the exchanges, coffee-houses and other meeting-places in the square mile itself.

The landed elite: a basis in land?

In the eighteenth century the distinction between a class of landlords and a class of capitalist farmer tenants had been sharpened by the continuing process of agricultural improvement. By 1850 the enclosure movement was all but completed and a third rural class of agricultural wage labourers had been created. The trilogy of landlord, tenant farmer and labourer characterised Victorian rural society and formed the basis of both contemporary and current images of the rural world.

The landlord was the undisputed chief figure in terms of wealth, power and prestige and the class of tenant farmers had fallen below the levels of privilege attained by both manufacturers and merchants. The rentier landowners at this time held about three-quarters of the land in England and a considerably higher proportion in Scotland. Running a great landed estate was very much a form of economic management. The estate was treated as a unit of capital and was administered through various rules, procedures and routines similar to those used in the larger mines and ironworks. The estate was managed by the landowner through agents and stewards, to whom general executive responsibilities had been delegated and who undertook the collection of rents, kept accounts and supervised the tenants. Large estates employed both a resident land agent with delegated authority but often also a chief agent with a subordinate staff to handle specialised tasks such as timber, minerals and so on. There existed in the landed estates a partial separation of ownership from control: the legal relation of ownership was entwined in a complex mediation of control whereby general supervision of the affairs of the estate -- strategic control -- remained with the landowner while the general day-to-day administration was the responsibility of a managerial staff. Where land was let out to tenants, strategic control was shared between the landowner and the tenant. The landowner and his agents exercised supervision over tenants and made decisions over the renewal of tenancies as well as contributing to the capital requirements of the farms. The tenant was not only the active day-to-day manager of his farm, but also participated in strategic control. The relationship between landowner and tenant was cemented in the financial arrangements whereby the tenant received the profits generated by his farming activity and used it to pay his rent to the landowner.

The landlords formed a system of intermarried extended families, each ranging over several generations and degrees of cousinhood, and each dependent on the fortunes of a particular estate. Family strategy was an important structuring mechanism in economic life and the highly regulated marriage market helped to ensure both the maintenance of the traditional family life-style and the perpetuation of the family estate.

The landed elite: diversification?

It was under the continuing influence of such family strategies that landowners began to diversify their interests. During the nineteenth century farming offered a relatively poor return when compared to the investment opportunities that had been opened by the development of industry. For this reason, many landowners diversified into investments in minerals, in urban property, in railways and docks and in overseas mining concerns to supplement their, at lest static, agricultural earnings.

Many landowners, for example, began to develop those parts of their estates that were well-sited for urban growth.[4] Until 1850 the urban areas, apart from London, were relatively small and localised, but the pace of development soon increased. In London the major landowners included the Duke of Portland, the Duke of Westminster (in Pimlico, Belgravia and Mayfair) and the Duke of Bedford (Bloomsbury and Covent Garden). In smaller cities and towns prominent landowners included: the Duke of Norfolk and Earl Fitzwilliam in Sheffield; the Marquess of Salisbury and the Earls of Derby and Sefton in Liverpool; the Marquess of Bute in Cardiff and the Calthorpes in Birmingham. As fashion shifted from the spa towns to seaside resorts in the 1880s and 1890s, landowners such as the Duke of Devonshire profited from the growth of such leisure centres as Eastbourne, Brighton, Hastings and Scarborough

In 1886, 69 out of 261 provincial towns were largely owned by great landowners and a further 34 were owned by smaller landowners. Similarly, the Duke of Sutherland, the Marquess of Bute and the Earl of Dudley were prominent as mineral developers. Railways offered gains not only through investment but, more importantly, through the sale of land to railway companies and through compensation money. Where landowners did invest heavily in railways, this tended not to be in main-line companies but in the secondary lines that connected their mineral interests to the main arteries of the railway network. In this way, landowners saw railway investment as a way of improving the yield earned from the agricultural and mineral resources of their own estates.

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[1] On this issue see S.D. Chapman Merchant Enterprise in Britain, Cambridge University Press, 1992.

[2] F.L.M. Thompson English Landed Society in the Nineteenth Century, Routledge, 1963 is the basic work. L. Stone and J.C. Fautier Stone An Open Elite? England 1540-1880, OUP, 1984, G.E. Mingay The Gentry, Longman, 1976 and J.C. Beckett The Aristocracy in England 1660-1914, Basil Blackwell, 1986, 2^nd ed., 1989 cover broader periods. These should now be supplemented by D. Carradine The Decline and Fall of the British Aristocracy, Yale, 1990 and Aspects of Aristocracy: Grandeur and Decline in Modern Britain, Yale, 1994.  General views, with sociological emphasis, can be found in J. Powis Aristocracy, Blackwell, 1984 and J. Scott The Upper Classes, Macmillan, 1980.

[3] On the development of banking in the nineteenth century see Michael Collins Banks and Industrial Finance in Britain 1800-1939, Macmillan, 1991.

[4] A good introduction to this subject is David Cannadine Lords and Landlords: the Aristocracy and the Towns 1774-1967, Leicester University Press, 1980 and David Cannadine (ed.), Patricians, power and politics in nineteenth-century towns, Leicester University Press, 1982.