The Takeover of the Stamford Spalding and Boston Banking Company

On August 19th 1911 the Stamford Spalding and Boston Banking Company Limited was taken over by Barclays Bank Limited. Here I explain how this happened.

The Bank had encountered liquidity challenges as they had faces, "a very serious depreciation in their investments, principally in Government securities", that had seen them have to provide £100,000 for this purpose alone. The unsettled conditions in Britain and abroad had seen them weaken their reserves and the shareholders were concerned about their ability to add to them.

Continued depression in the brick trade at Peterborough and elsewhere did not help, "Money advanced to brickmakers in prosperous times against securities, then at ample value, had been locked up. As the depression continued provision had to be made, either for losses or for an abnormal depreciation in the value of their covering securities. In a few cases they had been obliged to take over properties in satisfaction of their loans, either letting them or managing them until trade should improve."

Past retained profits had been adequate to overcome this. However, in 1911 they found themselves unable to pay a dividend to shareholders. The deposits at the Bank were about £4,000,000 and these were not deemed to be at risk. Barclays paid £210,000 for goodwill plus £7,750 to the directors, which they insisted went to the shareholders, plus a one-off sum of £11,783 12s., being the equivalent to half a year's dividend at 4% was paid to shareholders. Assets were handed over to Barclays, to cover debt and a £150,000 reserve held by Barclays in case of need if those assets dropped in value. In terms pf immediate cash being taken by shareholders it amounted to £74,533.

The financial crisis of the time was deemed to be a result of David Lloyd George's budget of 1909 in a Liberal desire to eliminate poverty by introducing unprecedented taxes on land and income of the wealthy. This was supported by Winston Churchill, the then President of the Board of Trade and together they were labelled "the terrible twins". The principle was to use taxation to redistribute wealth. They viewed it as a "war" budget - a war on poverty. The House of Lords vetoed the budget creating a constitutional crisis. This hit confidence in government securities reducing their value. This was only resolved by a general election in December 1910 and the subsequent passing of the 1911 Finance Act to prevent the Lords from blocking a future budget. The cost of this in the meantime was a suppression of economic activity and increased debt coverage required for Banks to retain their liquidity.