This chapter surveys the economic and business context within which British employers managed their labour force from the turn of the century to the Second World War. It stresses the major market fluctuations which resulted in dramatic shifts in the balance of power between employers and their employees. The chapter considers changes in market structure, in particular the growth of restrictive and protectionist practices which contributed to the maintenance of the traditional pattern of labour management. The period also saw a significant growth of large firms, especially in the newer sectors of industry; however, changes in corporate structure and managerial hierarchy came only very slowly and this inhibited the development of labour management. Finally the chapter deals with the management of production. Though there were important changes in production methods, there was also considerable continuity in work organisation and traditional patterns of work relations remained strong in many industries.

Economic conditions of war and depression

The early years of the twentieth century saw a continuation of the relatively poor economic performance of the British economy which had first become evident in the late nineteenth century. In the Edwardian period up to the First World War, there was a sharp deceleration of growth in output, industrial productivity, and incomes. Investment overseas yielded higher returns than capital invested in British industry and Britain's share of world manufacturing output and trade fell. It is not surprising that in these circumstances concern about foreign competition grew and anxieties about Britain's ability to meet the challenge mounted. The First World War hastened some trends and retarded others.