The Victorian Era

The Victorian Economy and Industrialization

Article · History & Overview · The Victorian Era, 1837–1901

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The Victorian economy was the most dynamic in the world. Between 1837 and 1901, British national income roughly quadrupled, the population of the United Kingdom more than doubled, and the volume of British trade grew even faster. Coal output rose from about 50 million tons in 1850 to over 200 million tons in 1900. Iron and steel production multiplied. The railway spread from a few experimental lines in the early 1830s to a network of over 22,000 miles by 1900. Steamships took over the world’s carrying trade. The City of London became the world’s banker, the Lloyd’s of London insurance market became the world’s insurer, and the British pound sterling became the principal international currency.

This page surveys the principal economic developments of the era, the industries that grew, the markets that opened, the labour that was employed, and the poverty that was generated. For the broader historical context, see The Victorian Era: A Complete Historical Overview, and for the political responses to the new economy, see Victorian Political History.

Population and Output

The economic expansion was accompanied by a transformation in the size and distribution of the British people. The population of the United Kingdom rose from about 24.5 million in 1831 to about 41.5 million in 1901. Coal output rose from about 50 million tons in 1850 to about 200 million tons in 1900. Pig-iron output rose from about 1.4 million tons in 1837 to about 9 million tons in 1900. British trade grew even faster: per capita trade grew roughly fivefold between 1830 and 1900, and the value of British exports rose from about £71 million in 1837 to about £354 million in 1900. By 1870, Britain was responsible for nearly a third of the world’s industrial production, and by 1900, despite the rise of Germany and the United States, it was still the largest single industrial economy on earth.

The Industrial Revolution in Britain

The economic history of the Victorian era is the second half of a longer story. The Industrial Revolution in Britain had begun in the late eighteenth century, with the mechanisation of the textile industry, the development of the steam engine, the construction of the first canals, and the growth of the iron industry. By 1837, when Victoria came to the throne, the transformation was already well advanced, but it was not yet complete. The Victorian era saw the full maturation of the industrial economy and its extension into new industries, new regions, and new parts of the world. The story of this transformation is examined in the page on the Industrial Revolution.

The principal industries of the period were cotton, wool, iron and steel, coal, shipbuilding, engineering, and, in the later part of the period, chemicals, electrical goods, and precision instruments. Lancashire was the centre of the cotton industry, Yorkshire of wool, the Midlands of metal-working, the Black Country of chains and nails, South Wales of coal and iron, the north-east of coal and shipbuilding, and central Scotland of coal, iron, and shipbuilding. The new industries clustered around particular sites: electrical engineering around London and the south-east, the chemical industry around Merseyside and the Tees, and the precision-instrument industry around London, Birmingham, and Sheffield.

Steam, Steel, and the Railway

The railway was the single most important economic development of the Victorian era. The first major inter-city line, the Liverpool and Manchester Railway, opened in 1830, only seven years before Victoria’s accession. By 1850, most of the main trunk lines had been built, and by 1870, the railway network of the United Kingdom had largely reached its final extent. The railway boom of the 1840s transformed the landscape, the labour market, the property market, and the stock exchange. The London and North Western Railway, the Great Western Railway, the Midland Railway, the Lancashire and Yorkshire Railway, and the North Eastern Railway were among the largest businesses in the world. The construction of the London termini — Paddington (1854), King’s Cross (1852), St Pancras (1868), Waterloo (1848), and Victoria (1860) — was one of the great architectural enterprises of the century. The story of the great railway stations is told in Famous Victorian Buildings and Landmarks.

The railway was not the only new transport technology of the period. The steamship, which had been developed in the early nineteenth century, became the dominant form of long-distance sea transport. The Great Western Steamship Company, founded by Isambard Kingdom Brunel, launched the Great Western, the first steamship to cross the Atlantic regularly, in 1838. By the 1870s, the sailing ship had been largely displaced from the long-distance trades, and the steamship had taken over. The opening of the Suez Canal in 1869, the laying of the first successful transatlantic telegraph cable in the same year, and the development of the modern cable ship all helped to shrink the world. For the transport history of the era, see Transport in the Victorian Era.

Cotton, Wool, and the Lancashire Cotton Famine

The textile industry was the leading sector of the British economy for most of the Victorian period. The spinning of cotton yarn, the weaving of cotton cloth, the spinning of worsted yarn from Australian wool, the weaving of woollen cloth, the production of linen from Irish and Belgian flax, and the production of silk from China and Italy were the great industries of the period. The domestic system of production, in which merchants put out raw materials to be spun and woven in cottage workshops, had largely given way to the factory system, in which workers were gathered under one roof, in mechanised processes, under the eye of managers. The factory system produced unprecedented output, but it also produced unprecedented concentrations of poverty, the mills of Lancashire and Yorkshire becoming bywords for industrial squalor.

The cotton industry was particularly important. Cotton was imported from the American South, from India, and from Egypt. The American Civil War of 1861 to 1865, which interrupted American cotton exports, produced the Lancashire Cotton Famine, one of the most serious economic crises of the Victorian period. The boom and bust cycles of the cotton trade, and the dependence of Lancashire on a single raw material, shaped the politics of the mid-Victorian era. The abolition of slavery in 1833, the free trade in sugar after 1846, and the development of the Indian cotton industry in the second half of the century all helped to reshape the industry. The story of cotton is one of the great case studies in the economic history of the period.

Iron, Steel, and Engineering

The iron and steel industries were the second great sector of the Victorian economy. The smelting of iron with coke, which had been developed in the early eighteenth century, was gradually replaced by the Bessemer process of 1856 and the open-hearth process of the 1860s, both of which produced steel in much larger quantities and at much lower cost than the older methods. The new steel was used for rails, for ships, for bridges, for buildings, and for a thousand other purposes. The firm of Bessemer, the firm of Siemens, the firm of Krupp in Germany, and the firm of Carnegie in the United States were the great steel producers of the period. The development of the modern ship, the modern bridge, the modern skyscraper, and the modern railway was made possible by the new steel.

The engineering industry was a direct outgrowth of the iron and steel industries. The workshop of Matthew Boulton and James Watt at Soho in Birmingham, which had produced the first commercial steam engines in the late eighteenth century, was joined in the Victorian period by thousands of smaller firms producing everything from steam engines to gas meters, from machine tools to electric generators. The engineering industry was concentrated in the Midlands, the north of England, and the central belt of Scotland, and it produced the export goods that paid for Britain’s food imports. The story of the engineering industry is examined in Victorian Inventions and Victorian Engineering Marvels.

Coal, Mining, and the New Mines

Coal was the foundation of the Victorian economy. It powered the steam engines of the factories, the railways, and the steamships. It heated the houses of the middle classes, the workhouses of the poor, and the great public buildings of the period. It was also the raw material of the gas industry, the coke industry, and the chemical industry. The output of the British coal industry rose from about 50 million tons in 1850 to over 200 million tons in 1900. The coal was mined in the coalfields of South Wales, the north of England, the Midlands, the central belt of Scotland, and the small coalfields of Kent and Somerset. The mining industry was dangerous, low-paid, and poorly regulated until the latter part of the century. The Mines Act of 1842 had restricted the employment of women and children underground, but the working conditions of the miners remained harsh. The story of mining is told in more detail in Victorian Inventions and Victorian Society, Class, and Daily Life.

The Financial System

The financial system of the Victorian era was the most sophisticated in the world. The Bank of England, founded in 1694, was the lender of last resort. The joint-stock banks, including the National Provincial Bank, the London and Westminster Bank, the London and County Bank, and the many other banks of the period, accepted deposits and made loans. The discount houses of the City of London financed international trade by discounting bills of exchange. The stock exchange, based at Capel Court in the City, financed the railway companies, the mining companies, the foreign government loans, and the colonial investments that made the empire. The life-insurance industry, led by firms such as the Prudential, the Standard Life, and the Equitable, provided for the long-term financial security of the middle class. The building societies, the friendly societies, and the savings banks provided for the working class. Britain adopted the gold standard in 1821, and would only abandon it in 1914, on the outbreak of the First World War.

The joint-stock company, which had been invented in the early seventeenth century, was perfected in the Victorian period. The Limited Liability Act of 1855 allowed companies to be formed with limited liability, in which the shareholders’ liability was limited to the amount of their shareholding. The Joint Stock Companies Act of 1856 simplified the procedure for forming such companies, and the Companies Act of 1862 provided a general framework for the registration of companies. The rest of the century saw a long procession of new companies, from the railway companies of the 1840s to the oil companies of the 1880s, the electric companies of the 1890s, and the rubber companies of the 1900s. The City of London was the centre of the global capital market, and the British capital exports of the Victorian era shaped the economies of Europe, the Americas, and the settler colonies. The story of the financial system is examined in Victorian Political History.

Work, Workers, and the Labour Movement

The Victorian economy was built on the labour of millions of working men, working women, and working children. In the textile mills, in the coal mines, in the iron foundries, in the engineering shops, in the brick fields, in the docks, in the construction industry, in the domestic service industry, and in the agricultural industry, working people laboured long hours for low pay. The hours were gradually reduced by legislation: the Factory Act of 1833 had limited the working hours of children in textile mills, the Ten Hours Act of 1847 had limited the working day of women and children, the Mines Act of 1842 had restricted the employment of women and children underground, and a long series of later acts had gradually extended regulation to other industries. The Victorian workhouse was the institution to which the very poor could be sent under the New Poor Law of 1834, and it became a byword for the cruelty of the system.

The labour movement grew during the period. The trade unions, which had been illegal under the Combination Acts of 1799 and 1800, were legalised by the repeal of those acts in 1824 and 1825, and the Combination Act of 1825 made combinations of workmen legal. The model union of the period was the Amalgamated Society of Engineers, founded in 1851, which established the principles of collective bargaining, mutual insurance, and friendly society benefit that would be copied across the labour movement. The Trades Union Congress was founded in 1868, and the first attempts to form a working-class political party began in the 1890s. The Independent Labour Party was founded in 1893, and the Labour Representation Committee, the forerunner of the modern Labour Party, was founded in 1900. The story of the labour movement is examined in Victorian Society, Class, and Daily Life.

Poverty, Inequality, and the Standard of Living

The Victorian economy produced unprecedented wealth, but it also produced unprecedented inequality. The richest one per cent of the population owned perhaps half of the national wealth. The bottom ten per cent lived in conditions that later generations would describe as Dickensian. The standard of living debate, one of the great debates of Victorian economic history, asked whether the working class was better or worse off in 1900 than it had been in 1800. The debate has never been fully resolved, but the consensus is that real wages rose substantially over the period, while the conditions of the very poor remained very poor.

The question of poverty was taken up by a series of investigators and reformers. Charles Booth, a Liverpool shipowner, published his monumental Life and Labour of the People in London between 1889 and 1903, and showed that almost a third of the population of London lived in poverty. Benjamin Seebohm Rowntree, a chocolate manufacturer from York, published a similar study of York in 1901. The two studies, taken together, gave the late-Victorian public a vivid picture of the extent of poverty, and they shaped the social reforms of the early twentieth century. For the life of the poor, see the page on the workhouse and Victorian Society, Class, and Daily Life.