Following the French Wars, Britain’s future should have been full of confidence:

“The half century from 1775 to 1825 saw the economy of Britain transformed by industrialization. London became the largest, and in absolute terms, the fastest growing city the world had ever seen. Its population more than doubled between 1750, when it was estimated as 676,000 and the fourth census of 1831, when it was 1,503,000. It is worth noting that by 1831 London already had a population greater than or equal to the capital cities of eight of the other current and prospective 14 European Community nations.” (David Barnett)

“At the end of the Napoleonic wars in 1815, the Bank of England began following the deflationary policies … the British economy began a period of rapid expansion, characterized by both an export boom and an investment boom.

“The opening up of the newly independent states of Latin America stimulated a boom in exports. At the same time, important infrastructure projects (e.g., gas lighting, canals, and railroads) stimulated investment expenditures. The sale of stocks to finance these ventures, in addition to gold and silver mines (some real, some fictitious) in Latin America, and sovereign government debt (initially European and later Latin American) propelled a stock market boom. The Bank of England’s easy monetary policy fueled the stock market boom and economic expansion. The Bank was also flush with high gold reserves amassed in the drive to resumption.” (Michael D. Bordo)

“It is unclear what caused the April 1825 collapse, but the Bank of England had in March sold a very large block of Exchequer bills, presumably to “contract the circulation” (Clapham 1945). The Bank in succeeding months continued to follow a cautious policy. The collapse of stock prices triggered commercial failures. By autumn (a season of normal financial stress), a number of country banks also failed. When several important London banks failed (e.g., Henry Thornton’s bank), a full-fledged panic ensued in early December.” (Michael Bordo)

What was clear is that the collapse affected everyone – few were exempt and everyone experienced the panic that followed. Even such eminent personalities of the day like the author Sir Walter Scott found themselves caught up in the turbulence. His London agents, Constable, invested heavily in the Latin American mining boom. As the agent’s main investor, Walter Scott found himself in debt for more than £120,000. The following spring, in a hearing at Chancery meant to anticipate bankruptcy proceedings, the judges gave Scott a choice: either sell Abbotsford or assign a sizeable proportion of the proceeds for all forthcoming works to his creditors. Scott agreed to the latter. Scott’s publishing interests were signed over to Robert Cadell, whom Scott regarded as a middle-class upstart. (Alex J. Dick)

Living with Commercial Distress in 1826 exposed the need for banking reforms. Fifteen years later the Canterbury Union Bank collapsed and with it, much of the Baldock fortunes were lost as William Henry Baldock attempted to avoid bankruptcy as one of the banking partners.

Hardly a town or city remained unaffected by the scale of the financial failure in 1825 and its aftermath. Newspapers reported closure after closure and the threat to the country banks. They went to great lengths to reassure the public that this collapse was manageable:

On December 10^th Messrs Walkers, Eyre, and Stanley received intelligence concerning the temporary suspension of payment by Everett and Co. in London. Walkers, Eyre and Stanley reassured the public that it would not affect their banking establishments in Sheffield and Rotherham.

At Hemel Hempstead a meeting of principal persons of the town and neighbourhood was arranged in consequence of the agitation and alarm occasioned by the suspension of several London Banking houses. At the meeting a statement of the affairs of the local Bank Messrs Grover and Pollard was submitted to the honour and credit of the firm which reassured the meeting, so much so, that several personal offers of assistance, if necessary, were immediately made. One gentleman alone volunteered the offer of £10,000 at a few hours’ notice. The affairs of Grover and Pollard made it unlikely that they would need to call on such an offer of assistance. The Bank had made careful provision for a sudden run on withdrawals.

The Nottingham Journal of December 17^th could not offer such reassurances:

‘It is with regret we state, that the embarrassments in the commercial world, alluded to in our last, and preceding publications, have taken a most extensive range, and produced effects, which even the best informed in such manners could not have anticipated.

‘Almost every day during the past week we have had fresh announcements of failures of eminent banking houses in the metropolis, having extensive country connections, who are necessarily involved in the same fate, though, ultimately, it is expected that some of them will be enabled to pay every farthing in full.’

The Nottingham Journal described the run on all the banks and could not recollect a another period when public credit had to endure such a severe trial. A public meeting of manufacturers tradesmen and others with the mayor presiding resulted in a declaration being signed expressing confidence in the solidity and safety of each and every one of the Nottingham banks. The subscribing members agreed to continue to receive the banks’ notes in payment as usual and were confident in the firms’ abilities to meet their demands.

So many newspaper accounts from different parts of the country reflect the abruptness with which the crisis had taken hold. Trade and industry remained apprehensive as they counted the cost of a depression that had taken hold for two months and now came to a head in the December of 1825.

In the South of England at Dover and Rochester, individuals stepped forward to restore public confidence. Upwards of 100 names headed by the magistrates of the district expressed their ‘unshaken confidence’ in the Rochester Bank, Messrs Day and Sons.

In what could have been better timing, the banks of Messrs G.K. Jarvis and G.W. Ledger made a declaration at their inauguration dinner during the harsh December:

‘The alarm, caused by the stoppage of several of the London Banks, and of some Country Banks connected with them, although it has not affected Dover, or its neighbourhood, may possibly do so, and although the long established credit of the Dover Banks, and their known prudence and responsibility, make us perfectly easy and free from all doubts as to their safety (and the same feeling we are quite certain, pervades the public at large); we, nevertheless, think it necessary, without having previously communicated with either of the firms, to declare publicly our opinion of their stability, and thus endeavour to guard against the public suffering inconvenience, by inducing the Banks not to diminish the circulating medium, nor to restrict that accommodation so beneficial to trade, which they have hitherto been accustomed to furnish.’

The signatures to the declaration went on to express their confidence in the stability of the Dover banks under the firms of J. Minet Fector and Co., and Latham, Rice and Latham’. They said that they would continue to take their notes to any amount and although a third bank, Minet and Strides, had declared several weeks prior their intention to close, confidence was expressed in that firm, too.

Speculation and misreports.

When the Times wrote that the Cambridge firms of Messrs. Thomas Fisher and Sons, and Messrs. R.E. and R. Foster had stopped payments to customers, Cambridge newspapers rushed to their defence. Reports claimed that the run on the banks was ‘partial and chiefly confined to their small notes, and every demand has been paid in gold or Bank of England notes.’

The Cambridge press were resilient in their defence of the local banks and went on to reassure readers that these respectable firms were amply provided for and could meet every claim, which the Public could have upon them:

‘…the confidence of Friends to each Firm’ was such that not a single deposit has been withdrawn. To conclude the point, the Cambridge newspapers had been authorised to state that several paragraphs which the Times gave ‘in that day’s Paper relative to the Cambridge Banks are most materially erroneous and unfounded’.

Almost all newspaper reports were focused on public reassurance even if the truth of the situation wasn’t so promising. The vulnerability of the banks remained and 16 years’ later, William Henry Baldock would lose everything as his partnership faced bankruptcy.

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References:

England’s stock market crash and banking panic of 1825. Michael D. Bordo

Financial Crisis of 1825 and the Restructuring of the British Financial System. Larry Neal.

The Structure of Industry in London, 1775-1825 David Barnett, MA

Walter Scott and the Financial Crash of 1825: Fiction, Speculation, and the Standard of Value. Alex J. Dick. University of British Columbia

Commercial Distress. House of Commons Debate 28 Feb 1826