During the interwar years, the south Wales coal industry suffered from a loss of markets, leading to a fall in output, employment and profits. Examine the extent to which these factors affected either three specific companies based in the coalfield, or a specific south Wales valley.

BS2572/BS8572 State, Business and the British Economy, Autumn semester assessment 2021-22
The aim of this assessment is to get you to interpret business-related data in order to address a topic of historical relevance relating to the economic history of the British economy during the pre-Second World War period. The data provided relates to the performance of selected individual businesses (e.g. profits, dividends on ordinary shares) operating during the first 40 years of the twentieth century (or some part thereof) taken from both the old, declining, staple industries (e.g. coal, iron and steel) and new industries (e.g. motor vehicles, oil). Your task is to examine and interpret relevant data, either for a single company or a small sub-group thereof, from that provided (and/or which you have found from your own research) to address one of the topics indicated below. The data should be interpreted in the light of the debate amongst economic and business historians relating to the chosen topic. To this end, you may also wish to consult other data sources indicated (e.g. Marquand (1937), Mitchell (and Deane) (1962), Mitchell (1988), Williams (1985)) or contemporary sources available online (e.g. The Times Digital Archive and the Economist Historical Archive, both available via the University library website). Please note that you only have to address one of the topics, not all three. Your work will be assessed according to the assessment criteria set out in module outline and, in particular, your ability to incorporate and interpret relevant data within the framework of the debate surrounding the topic which you have decided to answer.
Topics (choose only one):
1. During the interwar years, the south Wales coal industry suffered from a loss of markets, leading to a fall in output, employment and profits. Examine the extent to which these factors affected either three specific companies based in the coalfield, or a specific south Wales valley.
2. Using data for a small number of companies (a minimum of three), examine the extent to which the First World War impacted on their profitability. Account for any differences found.
3. Using profit data for a small number of companies, consider the extent to which businesses operating in the ‘new’ industries during the interwar years performed better than those in the ‘old’ industries. How much of the difference can be explained by variations in the extent to which new (scientific) management techniques had been adopted?

A word of warning about the supplied business data on profits
During the period covered by this assessment, the rules which had to be followed by companies in drawing up their annual accounts were somewhat limited and directors of a company were able to set them out in whatever way they wished, as long as the information presented a ‘true and fair’ view of the company’s financial position. Changes in the mode of presenting information could, and often did, change over time, and hence the supposedly simple concept of profit may no longer be so when one tries to compare profit figures over time, since changes in definition may have occurred without this being clearly indicated. Hence time series runs of profit data, even when taken from the same source through time, need to be considered with some caution, especially where one does not know precisely how the figures have been arrived at. Where such figures are taken from different sources, as often has to be the case, then the figure for one year may not necessarily be directly comparable with that given for another year.
There are, of course, different conceptualisations of profit. For an economist, profit is simply the difference between revenue and costs, where the latter implies all economic costs (including opportunity cost), but for accountants it may simply be the difference between actual income and actual expenditure. Even here, however, there can be different concepts of profit, not least between gross profit and net profit, and whether or not it relates simply to the trading activities of the business, or all activities. Gross trading (or manufacturing) profit relates simply to the difference between the revenue received from selling goods during the financial year and the (direct) costs incurred in producing and selling goods during the same period (e.g. wages, cost of inputs, selling and transport costs, etc.). Net trading profit would then deduct items such as depreciation of machinery and equipment and any interest payments on loans which the company may have taken out in order to be able to continue to produce and sell goods.
When a company resorts to borrowing money (whether through debentures, notes or such like), rather than raising new capital through issuing more ordinary or preference shares, they will need to pay interest during the life of such loans – if such interest is not paid to those (the creditors) who have loaned the money (due, for example, to a failure to make sufficient gross trading profit or, indeed, a trading loss) then the company could be forced into liquidation by its creditors. In the interwar years, due to the prevailing economic situation, companies in many industries were often forced into borrowing large sums of money, and the amount of interest they had to pay out each year on such borrowings could be large, meaning that there could be a big difference between the company’s levels of gross trading profit and net (overall) profit. Since the ability to pay dividends to ordinary shareholders would depend on the latter rather than the former figure, a company which seemingly made a high gross trading profit in a year may not have been in a position to pay a dividend to ordinary shareholders since interest payments on loans were high and absorbed much, if not all, of the gross trading profit.
On the other side, however, net profit for the business as a whole could exceed the net trading profit, especially if the company had used former profits not distributed to shareholders or not directly invested back into the business itself, but in other activities, e.g. other businesses (by owning shares therein) or by lending money to others (e.g. the government). During the First World War, for example, when many firms had large surpluses of funds as a result of wartime profits, they would purchase War Bonds or such like, and earn interest thereon. This interest would represent revenue for the firm (as would any dividends paid out on shares they owned in other companies) and would therefore swell the revenue side of the company’s profit and loss account, increasing overall net profit of the business, although that profit had nothing to do with the company’s trading activities during the current financial year.
While there can be a problem in comparing profit figures for a single company over time, due to changes in accounting conventions used, or through incomplete information being provided in press coverage of a company’s affairs (see, for example, entries in The Times and The Economist), more problematic is the attempt to compare across companies at a given time. Once again, the use of different accounting conventions can be problematic when trying to compare profit figures, while direct comparisons of the dividend payments on ordinary shares made by different companies is affected not only by the net profit made, but by decisions of a company’s directors as to what policy should be adopted towards shareholders – the boards of directors of some companies might decide to distribute as dividends all but a small amount of the net profits shown in the profit and loss account while in other companies they may decide to keep them within the business as retained earnings/ploughed-back profits. Hence, any comparative analysis needs to be carried out with care, and you should beware trying to claim something from profit data that might not be true. However, comparative data can be indicative of common problems affecting companies in a given period and, if those companies are in the same industry, the travails affecting that industry.

For more on company profits during the early twentieth century and their reliability, see:
Arnold, A.J. (1997) ‘Corporate financial disclosures in the UK 1900-24.’ Accounting, Business & Financial History 7 (2): 143-173.
Arnold, A.J. (2014) ‘“A paradise for profiters”? The importance and treatment of profits during the First World War.’ Accounting History Review 24 (2-3): 61-81.
Arnold, A.J. and Matthews, D.R. (2002) ‘Corporate financial disclosures in the UK, 1920–50: The effects of legislative change and managerial discretion.’ Accounting and Business Research 32(1): 3–16.
Boyns, T. (2020) ‘Obfuscation in British published accounts: Birmingham Small Arms Co. Ltd., c.1897-c.1939’ [Draft prepared for WEHC pre-session ‘Accounting resources for Economic and Financial History (19th and 20th c)’ – available in folder ‘Specific Tutorial Readings’ under ‘Tutorial Questions/Answers’ tab on Learning Central]
Boyns, T. (2021) ‘Depreciation during the second industrial revolution: the British cycle and motor vehicle industries, c.1896-c.1922’, Accounting History Review, 31(1): 73-112.

Sources
[Please note that the references listed here either provide a possible source of relevant information and/or links to other potentially useful sources.]

General data sources
Mitchell, B.R. (and Deane, P.) (1962) Abstract of British Historical Statistics (Cambridge: University Press) (ASSL HA1135.M4)
Mitchell, B.R. (1988) British Historical Statistics (Cambridge: University Press) (ASSL HA1134.M4)
Williams, (L.) J. (1985) Digest of Welsh Historical Statistics, 2 vols. (Cardiff: Welsh Office), especially vol. 1. (ASSL Reference; ASSL Salisbury Library, WG4.2W; Talybont Research Reserve – 310.9429 WEL)

Topic 1
Buxton, N.K. (1978) The Economic Development of the British Coal Industry (London: Batsford) (ASSL HD9551.5.B8)
Hare, A.E.C. (1940) The Anthracite Coal Industry of the Swansea District (Swansea: University of Wales Press) (ASSL Salisbury Library, WG8.H)
John, A.H. and Williams, G. (eds.) (1980) Glamorgan County History vol. V – Industrial Glamorgan (Cardiff: Glamorgan County History Trust) (ASSL Salisbury Library Celt Folio DA740.G5.G5; Celt Reference DA740.G5.G5)
Lewis, E.D. (1984) The Rhondda Valleys: A Study in Industrial Development, 1800 to the Present Day (Cardiff University Press) (ASSL Salisbury Library Celt DA740.R5.L3)
Marquand, H.A. (ed.) (1937) Second Industrial Survey of South Wales (Cardiff: Cardiff University Press Board), especially, vol. I (Chapters 2 (Mining and associated industries) and 3 (Metal and engineering industries)) and vol. 3 (Chapter 1 (Labour supply and demand in the south Wales coalfield)) (ASSL Salisbury Library, WG8.N)
Shore, L.M. (2012) Peerless Powell Duffryn of the South Wales Coalfield (Lydney: Lightmoor Press), esp. chapters 8-10 (ASSL Salisbury Library, Celt Folio HD9551.9.P6.S4)
Shore, L.M. (2017) The Tredegar Company: One of the South Wales Coalfield’s ‘Big Three’ (Lydney: Lightmoor Press), esp. chapters 7-8 (ASSL Salisbury Library, Celt Folio HD9551.9.T7.S4)
Supple, B. (1987) The History of the British Coal Industry, Vol. 4: 1913-1946 – The Political Economy of Decline (Oxford: Clarendon Press), esp. chapter 9(ii), ‘Business performance and entrepreneurial quality’, pp. 386-410 (ASSL HD9551.5.H4)
Watson, R. (1997) Rhondda Coal, Cardiff Gold – The Insoles of Llandaff Coal Owners and Shippers (Cardiff: Merton priory Press), esp. chapter 9 (ASSL Salisbury Library WG4.38.W)
Williams, C. and Croll, A. (eds.) (2013) Gwent County History Vol. 5 – Twentieth Century (Cardiff: University of Wales Press), chapters 3 (Coal) and 4 (Iron, steel and aluminium) (ASSL Celt DA740.G88.G9)

Topics 2 and 3
(See also Items listed under Topic 1)
Boyns, T. (1998) ‘Budgets and budgetary control in British businesses to c.1945’, Accounting, Business & Financial History, 8(3): 261-301.
Boyns, T. (2019) ‘Birmingham Small Arms Co. Ltd. 1919-1939: information, budgeting and control’ (unpublished paper presented to a conference in Nice, March 2019 – a copy can be found on Learning Central in the folder ‘Specific Tutorial Readings’ under ‘Tutorial Questions/Answers’ tab).
Boyns, T. and Edwards, J.R. (2013) A History of Management Accounting: The British experience (London and New York: Routledge) (esp.ch.9) (ASSL 658.15110941 BOY; online copy also available).
Church, R.A. (1979) Herbert Austin – The British Motor Car Industry to 1941 (London: Europa) (ASSL HD9710.C4) (Contains material related to the history of Austin Motors Ltd.).
Church, Roy A. (1994) The Rise and Decline of the British Motor Industry (London: Macmillan) (ASSL HD9710.G7.C4).
Coleman, D.C. (1969) Courtaulds – An Economic and Social History vol. II – Rayon (Oxford: Clarendon Press) (ASSL 338.47677C).
Corley, T.A.B. (1988) A History of the Burmah Oil Company, Vol. II 1924-1966 (London: Heinemann) (ASSL 338.2728C).
Davenport-Hines, R.P.T. (1984) Dudley Docker – The Life and Times of a Trade Warrior (Cambridge: Cambridge University Press) (ASSL HC252.5.D6.D2; 658.40092 D) (Contains material related to the history of BSA Ltd.).
Lloyd, I. (1978) Rolls-Royce – The Growth of a Firm (London: Macmillan) (ASSL HD9710.G74.R6.L5; 338.47629L).
Lloyd, I. (1978) Rolls-Royce – The Years of Endeavour (London: Macmillan) (ASSL HD9710.G74.R6.L5).
Lloyd-Jones, R., Maltby, J., Lewis, M.J. and Matthews, M. (2006) ‘Corporate Governance in a major British holding company: BSA in the interwar years’, Accounting Business & Financial History, vol. 16(1): 69-98.
Lloyd-Jones, R., Lewis, M.J., Matthews, M. and Maltby, J. (2005) ‘Control, conflict and concession: corporate governance, accounting and accountability at Birmingham Small Arms, 1906-1933’, Accounting Historians Journal, Vol. 32(1): 149-184.
Pugh, P. (2000) The Magic of a Name: the Rolls-Royce story, the first 40 years (Cambridge: Icon) (Trevithick TL215.R6.P8).