Enterprise and Society Advance Access originally published online on December 5, 2007
Enterprise and Society 2007 8(4):881-919; doi:10.1093/es/khm104
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Jealous Monopolists? British Banks and Responses to the Macmillan Gap during the 1930s
PETER SCOTT is Professor of Business History in the Department of Management at the University of Reading Business School. Contact information: Department of Management, University of Reading Business School, PO Box 218, Whiteknights, Reading, RG6 6AA, UK
LUCY NEWTON is a Lecturer in the Department of Management at the University of Reading Business School. Contact information: Department of Management, University of Reading Business School, PO Box 218, Whiteknights, Reading, RG6 6AA, UK
p.m.scott{at}reading.ac.uk
l.a.newton{at}reading.ac.uk
By the end of World War I successive merger waves had produced an oligopolistic, tightly cartelized, English banking system, which was widely viewed as having restricted lending to small-medium-sized firms—the famous ‘Macmillan Gap’ in industrial finance. We explore the reasons behind the failure of market entry to bridge this gap. The clearing banks are shown to have acted as ‘jealous monopolists’, obstructing the activities of the Credit for Industry Ltd (CFI), the only significant firm established to breach the gap (rather than narrow its upper limit). By poaching many clients it had vetted and approved, the banks blocked CFI's growth, deterring further market entry, and thus, preserving their monopoly position.
Many thanks are due to Philip Winterbottom of The Royal Bank of Scotland Group Archives; Karen Sampson and Natasha Cole-Jones of the Lloyds TSB Group Archives; Sara Kinsey and Edwin Green of the HSBC Group Archives; Barclays Bank Group Archive; the staff of the British Library of Economic and Political Science Archive; National Library of Scotland, and Bank of England Archives. We would also like to thank Mark Billings, Howard Cox, and Phillip Winterbottom for their comments on earlier drafts of this paper.