350 Years of English Leadership

Global Financial Data is completing its collection of data for the English stock market. The UK stocks database includes data on 25,000 companies from 1657 when the East India Company started trading in London to 1985. GFD has written two other articles, “Four Centuries of Global Leadership” and “Two Centuries of American Leadership” which analyze how leadership in the global and American economies, with leadership defined as the largest listed company by market capitalization, has changed over the past several centuries. This article focuses on England. London has a long history of creating companies that explored the world. As William R. Scott described in his three-volume set, The Constitution and Finance of English, Scottish and Irish Joint-Stock Companies to 1720, there were dozens of joint stock companies that were established in England before the South Sea Bubble in 1720 and the passage of the Bubble Act. The Virginia Company was established to create its colony in Jamestown. Dozens of other companies were founded, but ownership of the companies was so limited and concentrated that there is very little record of trades in their shares. When the Bubble Act was repealed in 1825, the number of companies in England exploded. Although there is very little data on the trade in shares before 1694, we have been able to piece together some data on shares outstanding and trades from 1657 to 2017 to create 360 years of data on the largest companies in the United Kingdom every ten years from 1657 to 2017. GFD’s capitalization tool allows you to find out the size of the largest company and its competitors every year from the 1650s to the 1980s, if you want this information in detail. What is fascinating about this history is not only what it tells us about capitalism, the financial market and technological change, but the politics of the market. Two companies that dominated the London Stock Exchange in the 1700s and 1800s were nationalized after World War II. The period between World War I and the Big Bang impacted the companies that were listed in London and their size, as did the merger and acquisition activity after the Big Bang. Politics, markets, technology and finance are all intertwined and developed over time in reaction to each other. For a history of the London Stock Exchange, you need to look no further.  

East India Company.

In some ways, the largest company in England up until the 1720s wasn’t really an English company, but a company dedicated to foreign trade in India and the Far East. Actually, there were three companies, the East India Company, the New East India Company and the South Sea Company that dominated both foreign trade and the stock market in England until 1720. The British East India Company was actually established in 1600, a year before its Dutch cousin, but the Dutch East India Company was more successful than its English counterpart in the 1600s, taking over Indonesia and defeating the British East India Company in open battle to maintain its control over the Far East. Nevertheless, the British East India Company was successful enough that other private firms wanted a cut of the action. In 1694, the East India Co. lost its British monopoly over trade with India and in 1698 a new company, the English Company Trading to the East Indies was established to compete with the Governor and Company of Merchants trading with the East Indies. But competition meant fewer profits, and in 1708, the two companies merged into the United Company of Merchants of England trading to the East Indies after providing £3.2 million to the British government for the exclusive right to trade in India and the Far East. Those were the good old days when companies paid for their monopoly directly. As the table at the end of the article reveals, the original East India Company was the largest corporation in England in the 1600s. The New East India Company gained that prominence in 1698 and remained the largest company until 1708 when the conjoined company took over from its two predecessors. 1720 was the year of the South Sea Bubble when England followed in France’s footsteps and got holders of the bountiful British government debt to convert their bonds into equity in the South Sea Co. in the hopes of making a fortune. In 1720, there were 100,000 shares of South Sea stock outstanding and when the company’s shares hit £1045 on June 29, 1720, the market cap of the company was over £100 million. No other English company reached the £100 million mark for the next 200 years when Shell Transport and Trading broke through the £100 million barrier. Even at this summit, the South Sea Co. was half the size of the Compagnie des Indes which reached 210 Million Pounds in 1719 (6,302 Million Livres Tournois). This sum was slightly less than $1 billion, a size no company reached until Standard Oil became the first billion-dollar company in 1913.  

The Bank of England.

The South Sea Bubble brought an end to the dominance of foreign trading companies over the British stock market. From the 1720s to the 1860s, the Bank of England was not only the largest company in England, but in the world. Central banks dominated global stock markets in the 1800s. Whether it was England, France, the United States, Ireland or any other country, the largest company was usually the central bank. This remained true until the rise of the railroads during the 1800s. Central bank stocks were safe and provided a higher return than government bonds. Unlike the Bank of the United States, the Bank of England had a perpetual charter and faced virtually no competition. In fact, during the 1700s, the Bank of England was the stock market in England since it represented about 90% of the stock market capitalization of the British Isles. Between 1730 and 1860, depending upon market conditions, the Bank of England ranged in size from £12 million to £32 million ($60 million to $150 million). However, the Bank of England was only able to maintain its reign for so long. The railroad bubble of 1845 laid the foundations for the industry which would dominate the stock market during the rest of the nineteenth century.


The London and Northwestern Railway

After the collapse of the railroad bubble of 1845, railroad companies in England merged with one another to control costs and raise prices. The largest railroad agglomeration was the London and North Western Railway which included the Grand Junction Railway, the London and Birmingham Railway and the Manchester and Birmingham Railway. The railroad continued to acquire other railroads in Lancashire and the Midlands making it the largest company in the world in 1865. The core of the line connected London to Birmingham, Liverpool and Manchester. At its peak, the company employed over 100,000 people. After 1900, the profitability of all the railroads in England declined. In 1923, the British government amalgamated all the British Railways into four main lines with the London and North Western Railway becoming a component of the London, Midland and Scottish railway. After World War II, the Bank of England and all the English railways were nationalized, and the two companies that had dominated the global economy from 1720 to 1900 became the property of the British government.

Oil and Tobacco

In 1890, Standard Oil became the largest company in the world and since then, with the exception of the Japanese stock market bubble in 1989, the largest company in the world has always been an American company. Just as an oil company succeeded railroads as being the largest company in the United States, the same was true in England. Shell Transport and Trading took away the title from the London and Northwestern Railway in 1918.