Although few people remember it, the London and Northwestern Railway (LNWR) was the largest corporation in the world for over two decades. The London and Northwestern Railway is the only railway to rank as the largest corporation in the world. No less than Charles Dickens pointed out that the LNWR was “wealthier than any corporation in the world.” The railroad became the largest corporation in the world in 1865 when its rapid growth and acquisition of other railways made it bigger than the Bank of England. The LNWR kept this position until the rise of Standard Oil in 1890s made it bigger than any other corporation and put it on a crash course with antitrust forces in the United States.
At its height, the LNWR had over 100,000 employees and a market cap of over $400 million. The railway carried more people in one year than the population of Scotland and its revenues exceeded all the canals in England. The map below illustrates the routes the LNWR carried passengers on from the southern tip of England to the moors of Scotland. How did the railroad become the largest private corporation in the world, and what led to its demise?
The first railroad in England and in the world was the Stockton & Darlington Railway which began hauling coal to a local port on September 27, 1825, but the first proper railway in England was the Liverpool and Manchester which eventually linked up with other railways to form the LNWR and the largest network in England. The Liverpool and Manchester introduced several innovations. It relied exclusively on steam engines (no horse-drawn carriages as on the Stockton & Darlington) and the company had a double track along the length of the line from Liverpool to Manchester to avoid delays when two trains met each other on the track. It was the first railway to have a signaling system, it followed timetables and carried mail.
One of the goals of the Liverpool and Manchester was to provide competition with the Mersey and Irwell Navigation and the Bridgewater Canal which was hauling textiles from the port of Liverpool to the textile mills in Manchester. The company was founded in 1824 and received the Royal Assent in 1826. George Stephenson, who had worked on the Stockton & Darlington was appointed the Chief Engineer for the Liverpool and Manchester Railway. The line was to be run completely by steam and Stephenson won the £500 prize for producing the Rocket locomotive which could achieve the amazing speed of 30 mph at full steam.
The line opened on September 15, 1830 hauling the Duke of Wellington and other dignitaries the 35 miles from Liverpool to Manchester. The Arrow locomotive paused for water halfway to Manchester, and although the passengers were warned not to leave the train, they were used to taking a stretch at a stagecoach stop and over 50 passengers got off. The passengers were warned that the Rocket was approaching on the other track and one of the passengers who had gone to greet the Duke of Wellington failed to get back on the Arrow in time and was killed by the speeding Rocket (the first locomotives had no brakes and could only throw their value gear into reverse to slow the train down). The first railway fatality was suffered on the first day the railway ran.
As the chart below shows, the Liverpool and Manchester was a very successful venture for shareholders and paid a 10% dividend throughout most of its history. The fare for passengers was relatively expensive. First-class seats were 35 pence and second-class seats 20 pence. All this when the average salary for working class people was £1 a week. Nevertheless, many customers were attracted to the railway by its novelty, and the railway earned twice as much revenue from passengers as it did from freight.
Workers employed by the railway got little time off. They were expected to work 16 to 18 hours a day, six days a week. Sunday was their only day off. But in an era when permanent jobs were few and far between, the fact that a worker could get a job for life offset the burden of the long hours they had to work. The railway also provided housing for many of its employees.
In the 1840s, the railway mania struck Britain and in the crash that followed, many of the railways consolidated to form networks that stretched across the country. The most prominent of these amalgamations was the London and Northwestern Railway which combined the Liverpool and Manchester, the London and Birmingham and the Manchester and Birmingham Railway. It soon became the largest railway in the world.
The London and Birmingham Railway was the first intercity line to be built into London stretching 112 miles between the cities. It was also engineered by Robert Stephenson. The line began at the Euston Station in London and completed its path at the Curzon Street Station which it shared with the Grand Junction Railway enabling it to connect with the Liverpool and Manchester and the Manchester and Birmingham Railway. The railway was supported by the textile factory owners in Birmingham as a way of bringing their textiles directly to London. But the landowners were opposed to railways being built across their lands. As one member of the aristocracy put it, why should “our estates be cut up in all directions for the purpose of making an unnecessary road?”
In the United States, the government could declare eminent domain and take over the land necessary to build a railroad, but this was not the case in Britain. The London and Birmingham spent 20% of its capital buying the rights to the narrow slivers of land that made up the railway line. The first railway application was rejected due to landowner opposition, but the line was approved in 1833 and the first line opened, leaving Euston Station in London in 1837. As the railway progressed, stage coaches took passengers from one station to another on the uncompleted parts of the railway, but eventually, the railway was completed and stage coaches were no longer needed.
British railways got a boost in 1851 when the Great Exhibition took place at the Crystal Palace outside of London. During its first six months, over 6 million people, or about 30% of the British population, attended the Exhibition, almost all of whom arrived by train. After the Exhibition, almost everyone in England found the use of the railway an acceptable means of transportation. By 1854, 92 million journeys were made by the 21 million people of England and Wales.
The London and Birmingham Railway was hugely successful, paying a 10% dividend by the 1840s. However, the Great Western Railway planned to build a line from Oxford to Birmingham and in order to forestall this competition, the 350-mile long London and North Western Railway was formed. The railway expanded through acquisition, acquiring the North Union Railway in 1846, the Chester and Holyhead Railway in 1848, the Lancaster and Carlisle Railway in 1859 and the Lancaster and Preston Junction in 1859. The company introduced limited mail service on February 1, 1859, introduced sleeping carriages in 1873 and provided a special car for the queen. With the cooperation of the Caledonian Railway, the LNWR stretched up to Edinburgh and Glasgow providing passengers with a railway service from London to Glasgow. The railway became known as the Premier Line.
The London and Northwestern Railway provided a complete service. While American railroads purchased their locomotives and railway cars from companies like Baldwin and Pullman, the London and Northwestern Railway built their own locomotives and railway cars at the Crewe Locomotive Works, the Wolverton Carriage works and the Earlestown Wagon works. By 1913, the railway covered 1,500 miles and employed 111,000 people generating revenues of over £17 million. On January 1, 1922, the LNWR absorbed the Lancashire and Yorkshire Railway, the North London Railway, the Dearne Valley Railway and the Shropshire Union Railways and Canal Co. giving the LNWR over 2,700 miles of railway across Great Britain.
British railways peaked in value in 1900 and declined in price steadily thereafter. When World War I began, the railways were expected to focus on supporting the war, not on making profits, and by the time the war was over with, the railways were in poor shape because a lack of maintenance. Consequently, the railways were becoming dangerous to travel on and because of competition, they were unable to raise their prices to update their infrastructure. In 1923, the British government merged England’s 120 railways into four major railways to reduce competition and enable the railways to invest capital in upgrading their networks. The LNWR became part of the London Midland and Scottish Railway which operated 6,870 miles of railway.
But the railways had to compete with automobiles and trucks and failed to keep up with the times. The railways shrank in value. By 1932, the capitalization of the London Midland had shrunk to £15 million, one fifth the size the railway had been in 1900. The railway was no longer the largest corporation in the world or in Britain. It was just the twenty-fifth largest company in Great Britain. After World War II was over, the British government nationalized the British railways on January 1, 1948 under the Transportation Act of 1947 and what had once been the largest corporation in the world was now administered by the British government.
At its peak usage in 1900, the British railways carried 1.5 billion passengers, but this shrank to 1 billion by the time of nationalization in 1948 and to 750 million by the 1990s. The British Railways became an independent statutory corporation in 1962 known as the British Railways Board. Steam locomotives were completely eliminated by diesel and electric trains by 1968. The British government decided to privatize the railways and sold off its ownership between 1994 and 1997. Since privatization, the number of passengers has doubled. Although the railways have privatized, as in the United States, the government provides a subsidy to the railways, which has actually increased from £2 billion in the 1990s to £4 billion today. If you want to travel the same route the LNWR covered, you can book a trip on the West Coast Main line, stretch out your legs, and watch the countryside roll by.