§ The SELECT COMMITTEE, appointed to inquire into the State of Commercial Credit; and who were directed to report the same, as it should appear to them, together with their observations thereon, from time to time, to the House;—met, and examined a variety of witnesses; and have agreed upon the following REPORT:
§ Your Committee directed its attention to three points;
§ First—The extent of the difficulties and 250 embarrassments which are at present experienced by the trading part of the community:
§ Second—The causes to which the same should be ascribed; and,
§ Third—The expediency, with a view to the present and future interests of the merchants and manufacturers, and of the public, of any assistance being afforded by parliament.
§ Your Committee found, that memorials had been presented to his Majesty's treasury, towards the latter end of the last and the beginning of the present year, staling the great embarrassments and distress which were felt amongst the manufacturers in the cotton trade in Glasgow and Paisleys and their vicinity, and praying for public assistance; that the same were confirmed by the representation of a meeting held in the city of London, on the 12th of February, which sent a deputation to wait upon the Chancellor of the Exchequer, with a copy of the resolutions adopted at that meeting. These resolutions your Committee have inserted in the Appendix to this Report.
§ Your Committee found, by the evidence of the witnesses which they examined, that those statements and representations were founded on fact.
§ It appeared to your Committee, that the principal part of the distress which was complained of, had arisen out of great and extensive speculations, which commenced upon the opening of the South American markets in the Brazils and elsewhere, to the adventures of British merchants.
Mr. Garden,the chairman of the chamber of commerce and manufacture at Glasgow, said—"That in Glasgow and the neighbourhood the distress began among the manufacturing body of people, and it has pressed more severely upon them hitherto, than on any other class.—That it began about the month of October or beginning of November last: the cause of it appeared to him to be this. That a set of merchants in London, Liverpool, and Glasgow, conceiving that the markets of South America would consume a vast quantity of our manufactures, entered into a project of very extensive exports to those countries and to the West India islands, chiefly intended for the Spanish colonies; these expeditions not meeting a ready market, those exporters have not been able to pay the manufacturers, when the bills became due; these bills were 251 therefore returned upon the manufacturers, which created a great deal of distress.—Many of those houses that were the original causes of the evil, are gone to bankruptcy long ago; but they have created this evil upon the manufacturers of whom they purchased the goods, that the manufacturers have their property locked up in bankrupts estates; that part of it will be lost, no doubt, but yet that in the course of nine, twelve or fifteen months, a considerable part of the capital will return to the manufacturers; but while they are deprived of it, they go on with the greatest difficulty; many of the weaker have been broken down. That the manufacturers of goods who have capitals, still feel great distress from this cause; and it is that class of people that it would be desirable to relieve, because a little aid from government would enable them to go on with their business, though on a limited scale; but still they would be enabled to retain a certain proportion of their work people or labourers; whereas, if they get no kind of relief they must be broken down also, and the labourers with their families must be left without means of subsistence. That this distress still presses very heavily upon them, the export merchants not being able to pay the manufacturers for the goods they have taken. That in the course of trade great quantities of goods from Scotland were sold by agents in London; those agents gave a temporary accommodation to the manufacturer, but nothing more; when the merchants could not pay those bills which they had given for goods, the bills went back upon the manufacturers.
"That there is this chain of connection between the manufacturing body and the upper classes of merchants, the banks in Scotland having discounted or advanced money upon those bills of the merchants for the manufacturers; those bills having gone back, the manufacturers are not able to take them up; the capitals of the banks are therefore taken up also, and they are not able to give the regular accommodation which they had been used to do to their customers.—In this situation of things too, a want of confidence arises in the banks themselves, when they see people breaking down around them, they become timid and afraid of transacting any business; a want of confidence on the part of the banks, naturally creates distress among the upper classes of merchants, who are thus deprived of the usual ac- 252 commodation or means of negociation, that therefore persons who are possessed of solid property have not the same means of obtaining credit that they usually have had, and very far from it—this want of confidence in the banks makes them distrustful of every body, and the merchants have felt great inconvenience in consequence: The witness said, he understands that some of the banks at Glasgow and in that neighbourhood, do little business, they will rather accumulate their capital and wait the result of the present situation of things; this want of confidence creates general distress among very respectable merchants.
"That the intercourse of credit among the merchants themselves was much broken down by means of these circumstances, even where the merchants are solvent.
"That there is considerable injury to the manufacturer, from being obliged to stop his work; his machinery gets out of order, his workmen get dispersed through the country, and he cannot collect them again, but at considerable trouble and expence; and when it is understood that his business is stopped, he loses his custom, and when he begins again, it is almost the same as beginning a new business; it is therefore extremely important that the manufacturer should go on, though on a limited scale. "That in his opinion the demand would in a great measure come round to them again; that the home trade and some other markets are still open to them; that he has always seen in his experience of thirty years, that a glut in a market is followed by a brisk demand; for no person will supply the markets or adventure at all when they are overstocked, hence the market becomes exhausted, and of course a very good demand arises afterwards. The markets of South America and the West India islands are overstocked at present, but they will naturally come round, and the home trade always takes off a certain quantity, so that he had no doubt in six or twelve months this increased demand will do more than take off what is on hand now, or what will be manufactured in the mean time, which will be a very limited quantity indeed.
"That if there was no particular glut in the market, from the time of shipping the goods till the payment could be commanded in this country, he should conceive would be twelve or fifteen months; 253 it may in some instances be sooner, but, generally speaking, he should conceive about that time. In some instances payments have been much quicker, perhaps by the return of the same ship; and he mentioned that there have even been instances of ships returning within four or five months.
"The usual date of bills given by the merchant to the manufacturer is six or nine months, but in some cases it may be extended to twelve months; in cases where the goods are sold by an agent in London, that agent interposes his credit, and gives an accommodation to the manufacturer sooner, if he requires it, taking his chance of payment from the merchant.
"That the distresses were immediately and in the first instance occasioned by the want of payment for those that were vended; but at the same time the want of a market is certainly a part of the cause. The markets of South America having been for a time overstocked, there is no great demand at present; and even though there were a demand in the present situation of things, with the want of confidence and the want of credit, it would be difficult for the manufacturers to know to whom to sell with safety; that is chiefly occasioned by the want of payment for the goods sold: that will in some measure come round in the course of twelve months, and then the manufacturer will have his own capital again.
"That there has been a very considerable supply of this sort of manufactures sent to the peninsula, which was in a great measure with a view to their being sent to the Spanish colonies; that the same failure of payment happened in some degree, in respect of those goods, as those sent to South America; that one considerable house in London connected with this trade, which stopped or made a pause within the last two or three weeks, had sent a great quantity to Cadiz; and they informed the witness that the last account they had was, that the goods would all be sold in this and the next month, by which means they should be able to make a handsome dividend to their creditors; but their bills having gone back on the manufacturers, they are depressed in the mean time.
"That there had been a great fall in the price of the manufacture; that when he left Glasgow, there were some articles of manufacture which had fallen perhaps 40 or 50 per cent.; but he understands from communications since that, the fall is 254 greater, because the distress is become more general.
"With respect to the failures that had happened, there are several houses which will probably pay very large dividends; and indeed there are several of the houses in Glasgow that he alludes to, which stopped payment, have undertaken to pay their creditors in full in a certain time; one who had more than 200,000l. of bills out, has undertaken to pay his creditors in 3, 4, 8, 12 and 16 months, and probably he will do it, but in the mean time the manufacturers cannot command a shilling of this money; that the failure of these houses, before he left Glasgow, had amounted from one to two millions; one house (the same to which the witness alluded before) has failed since that time for 519,000l. which they have undertaken to pay in full.
"That the failures of the export houses, certainly arose from their having gone greatly beyond their capital, having exported goods to a far greater extent; but he understood many of those houses were not without capital, and some even had large capital, but being disappointed in the markets, it was found that they could not make their returns so quickly as their bills became due; there are houses of that description in Liverpool, and some in Glasgow."
Being asked, as to the amount of failures on the present occasion, as compared with those in 1793, he said, The proportion of failures will be always something in proportion to the extent of the trade, (which has increased wonderfully since 1793) and of course the failures now are to a much larger amount than they were at that period.'
Your Committee having given this full extract from the evidence of Mr. Garden, have to state, that it was in general confirmed by the evidence of Messrs. I. and R. Mackerrell, and Mr. Henry Fulton, muslin manufacturers at Paisley; and that evidence in a great degree to a similar import was given to the Committee by Sir Robert Peel. With regard to the state of the manufacturers in Lancashire, he stated, that the price of goods had fallen 40, 50, and in some instances 60 per cent.—that the greatest manufacturers had been obliged to reduce the quantity of their work by one-third, others one-half, and others again had been obliged to discharge their workmen altogether; and that even those which were continued in employment, 255 were continued at a very reduced rate of wages, amounting to not more than one-half of their ordinary payment—that under these circumstances, great distress Was felt amongst the workmen; and though there had not been any failures among the more considerable and best established houses of manufacture in Lancashire, yet that great distress and embarrassment must already be felt by many, and that some parliamentary assistance would be of most essential advantage.
Your Committee think it right to refer to the returns of the export of the cotton manufactures in the following years, to shew the state and progress of the trade in this article of manufacture, up to the period when this distress began to be strongly felt. The official value of cotton manufactures exported from Great Britain, in the year ending 5 Jan. 1808, was
It appeared to your Committee, that there had been no want of a disposition on the part of the banks in Scotland to give their accommodation; that they had liberally applied it as far as was possible; but that it was impossible they could continue their aid, as they had their capital already locked up in an immense number of bills, the payment of which was suspended.
£.9,846,889. In the year ending 5 Jan. 1809 12,835,803. In the year ending 5 Jan. 1810 13,616,723. And in the three quarters ending 10 October 1810 13,761,136. Your Committee also found, that great distress was felt in a quarter which was much connected with this trade, namely, amongst the importers of produce from the foreign West India Islands, and from South America.
That great parts of the returns for the manufactures which were exported to those parts of the world, came home in sugars and coffee; which not being entitled to sale in the home market, there were no immediate means of realizing their value.
These representations of the distress experienced in the trade of the cotton manufacturer and exporter, and from the want of market for foreign colonial produce, were also confirmed by respectable merchants and traders in London; who also stated, that the embarrassments were felt in other branches of trade, not connected with foreign commerce or colonial produce.
It also appeared to your Committee, that 256 one cause which might be considered as connected with and as at present aggravating the existing distress, was the extent to which the system of warehousing the goods of foreigners, as well as native merchants, for exportation, had been carried. On this point, the Committee refer to the evidence of Mr. Cock, commercial and public agent for the corporation of Liverpool, and general agent to the merchants of the town; who informed the Committee, that,
"Since the opening of the West India and London Docks, Great Britain has; under the provisions of the warehousing acts, become a free port, into which foreign goods of almost every description may be brought and safely deposited, and from whence they may be exported again without payment of importation duties.—This country possessing peculiar advantages for foreign commerce, the consequence of such facility to introduce goods from all parts of the world has been, that the merchants of other countries, whether neutrals, enemies or allies, have been eager to avail themselves of every opportunity of sending their goods hither. From Spain (for instance) such goods as have not been imported on British account, the Spanish merchants have been anxious to send here for safety and for sale—the same remark applies to Portugal; in fact, we are now the exporters of Portugal wines to that country. While importations from Europe, not the result of a demand for them, have thus been occasioned, the markets of South America, both Portuguese and Spanish, have been thrown open to us, and the greater part of the immense productions of those places (from which formerly we received but little property direct, except bullion) now comes to fill the warehouses, and for a time to exhaust the capitals of the merchants of this country. Our conquests also have had the same tendency; in addition to the produce of the old British colonies, we now receive that of Martinique, Guadaloupe, St. Cruz, St. Thomas's, &c.; the greatest part of the produce of Saint Domingo also now comes here. From Europe, the importations from places from which the British flag is excluded, have been immense—these causes co-operating at a period when the situation of the United States has prevented their ships from introducing into Europe that large proportion of West Indian and South American productions, of which they would have 257 been the carriers, the effects have been more sensibly felt by our merchants."
Your Committee, upon the whole, think themselves justified in stating, that the embarrassments and distresses at present experienced, are of an extensive nature; and though they are most severely felt amongst the manufacturers and merchants in those trades which have been more particularly specified, yet that they are also felt in a considerable degree in some other branches of trade; but they have the satisfaction of stating, that from the evidence of a very extensive and experienced merchant, it does not appear that they are felt in the woollen trade, to such an extent as would at all justify a call upon parliament for any extraordinary relief.
That your Committee are warranted in stating, that there appeared a general concurrence of opinion amongst those of the witnesses who were examined, as to the expediency of affording parliamentary relief in the manner in which it was afforded by the issue of exchequer bills in the year 1793, although there was some difference as to the extent of benefit which might be expected to be derived from such relief. And your Committee state it to be their decided opinion, that although there are many circumstances at the present time affecting the state of trade and commercial credit, which make a great difference between the present period and that of the year 1793, yet the distress is of such a nature and extent, as to make such parliamentary relief highly expedient and necessary; and that it promises to be productive of extensive and important benefit, that although in many cases such aid may not be capable of effectually relieving the persons to whom it may be applied, from great losses arising from the state of circumstances, yet by affording them time gradually to contract their operations, to call in their means, to withhold from immediate sale, articles which at present can fetch only most ruinous prices, and to keep up the employment of their machinery and their workmen, though upon a very reduced and limited scale; it will divide and spread the pressure of this distress over a larger space of time, and enable them to meet it with consequences less ruinous to themselves, and less destructive to the interests of the community.
That your Committee referred to the manner in which relief was afforded in the year 4393, and have found that the pro- 258 visions of that measure which, as appears by the report of the commissioners appointed on that occasion, was attended with the happiest effects, and the most complete success, are embodied in the act 33 Geo. 3. cap. 29; and the Committee are of opinion, that similar provisions should be adopted with regard to the relief at present proposed; that the amount of exchequer bills to be issued should not be less, nor would the Committee recommend that it should be more, than 6,000,000l. and that, considering the probable date of the returns of trade from South America, a greater interval should be given for re-payment than was allowed in 1793, the committee being of opinion, that the time for payment of the first quarter's instalment, should not be earlier than the middle of January next, and that the remainder of the sum advanced should be required to be repaid by three equal payments, from three months to three months, so that the whole should be discharged in nine months from the payment of such first instalment.
7th March, 1811.