A rise in world trade was the most important influence behind the improvement in freight rates and shipping values that began in 1910. From that year down to the last year of European peace, the value of the UK's foreign trade rose almost thirty percent, and shipping earnings grew by a similar amount. In 1910, freight rates rose slightly, but the upward movement gained momentum during 1911 and 1912 before falling off in 1913 as a downturn in trade and financial markets took place (appendix 3). In addition to favourable demand conditions, constraints on the supply of available tonnage provided additional impetus to the initial rise in 1910. The extremely low freight rates of the two preceding years, coupled with high insurance premiums, made it uneconomic to continue operating older vessels and led to a sharp increase in the number of ships sent to the breakers’ yards. In addition, the low number of new vessels that came onto the market in 1908 and 1909 caused the supply of tonnage to show virtually no increase for three years, 1907-1909; it was the first time this had occurred since the mid-1880s. Labour disturbances prevented output from catching up with demand and strengthened shipping values and rates.

This chapter examines the development of the Group's shipping services while these conditions prevailed between 1910 and 1914 and during World War I. In particular, the discussion focuses upon the wave of acquisitions that took place during this decade and relates the expansion of the Group to industry-wide changes. To set the stage, we provide an overview of the parent firm's performance.

The Context: Furness Withy's Performance and Group Acquisitions

Even though accounting conventions undermine the accuracy of the data and wartime regulations caused further distortions, it is possible to sketch roughly how the parent company progressed. Gross reported earnings grew impressively to 1913 and after a pause in 1914-1915 peaked in 1916 before stabilizing at a much lower level. The firm increased its dividend to very attractive levels and accumulated large open reserves (£1.75 million by 1919). Furness Withy's payout ratio was just over thirty-seven percent, confirming that it retained a significant proportion of earnings.