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A further possible cause put forward for the poor showing of British industrial progress in this period was the structure of the British and, particularly, the London capital market. On the one hand, it was said, British banks traditionally did not make long-term investments in industrial firms, unlike the banks in some other countries, notably Germany, and industrial firms therefore lost not only a relatively easy access to capital, but also the advice and expertise which German ‘universal’ banks were able to supply to their favoured customers. On the other hand, private investors were persuaded, largely by the predilection of better than home gilt edged securities. There is no doubt that while savings in Britain as a proportion of incomes were comparable with those in the USA, Germany and other advanced countries, a far larger share of them went abroad, so that a far smaller share was left to finance home productive industry. More serious, was the problem of the survival of much out of date capital which its owners were unwilling to scrap as it had been written off and thus carried no balance sheet costs, whereas without that burden, they would have had to invest in up to date equipment. Kennedy argued that ‘Capital market imperfections were central to an economic process that served to justify an increasingly peculiar pattern of resource allocation in which important activities – not least technical education – highly profitable in other advanced economies proved to be much less so in Britain.’ Welcome Finance
A further cause of the slow adoption of particular new techniques from abroad might be differences in relative factor prices. In particular, labour, and especially skilled labour, was much cheaper in Britain than in the USA, so that it would sometimes not pay to substitute capital for it in Britain, while it might have paid to do so in the USA. There was also the frequently cited obstructions by labour, and above all by the organised trade unions, to technical innovation, either by outright objections, as in some of the cutlery tool trades, by glass makers and printers, or, more commonly, by combining acceptance of the new equipment with demands which made its installation unprofitable Welcome Finance
Finally, the relative slowdown of British economic growth might have been caused by the action or inaction of government. Policies detrimental or unhelpful to economic growth have been held to include the inadequate provision of education, particularly facilities for education in science and technology as well as in research; maintaining free trade in a world of rising projectionist barriers’ factory and other protective legislation’ and specific decisions such as those affecting tramways in 1870, electric power supply in 1882, the notorious ‘Red Flag Act’ and the patent law until its reform in 1907. Welcome Finance
