The outbreak of war in 1914 placed great strain on Glasgow's shipbuilding and engineering industries. Huge orders were placed with firms which were already working on munitions or naval contracts, while those which were not were starved of work. William Beardmore & Co received orders for a bewildering variety of products which required huge extensions to capacity. When it became clear that the conflict would be protracted, war work was distributed more evenly and with the outbreak of the unrestricted "U" boat campaign in 1917 the whole shipbuilding industry was called into service. As a result, by the end of the war the industrial base had been greatly expanded. In the mistaken belief that peace would bring an unprecedented boom, shipbuilders diversified into steel making to secure their supplies and were themselves acquired, or formed strategic alliances, with shipping companies or other shipbuilders.
By 1920 economic recession had set in and it was recognised that action needed to be taken to reduce shipbuilding capacity, first of all in the steel industry and later in shipbuilding and other industries. This was difficult to achieve, as individual firms were fiercely independent and reluctant to participate in schemes that would result in the loss of their identities. As the recession dragged on, many were forced to accept that the only alternative to bankruptcy was rationalisation. Colvilles was formed to take over the assets of almost the whole of the west of Scotland steel industry in 1931 and over the next five years some plants were closed for ever.
William Beardmore & Co, which was hopelessly over-extended, had already succumbed and under the direction of the Bank of England its businesses were dismembered. The huge naval shipyard at Dalmuir closed in 1930 and the firm was left only with the Parkhead Forge, which became the property of the lower Clyde shipbuilder, Sir James Lithgow. He was the architect of an ambitious scheme to reduce shipbuilding capacity on the river and elsewhere in the United Kingdom through National Shipbuilders Security Ltd, which bought and de-commissioned redundant shipbuilding berths. Amongst the yards on the upper Clyde which were closed in this way were Meadowside at the mouth of the Kelvin and the east yard of Barclay Curle at Whiteinch.
Even the yards which remained open found orders hard to come by. Late in 1931 work stopped on Ship No 534 at Clydebank and her unfinished hull "looming in its abandonment as if shipbuilding man had done too much" became a symbol of the slump throughout the world. The collapse of shipbuilding had ramifications throughout the city's industries, many of which depended on sub-contracts from the yards for their livelihood. Some were forced to sack their workforce and shut their doors, waiting for better times. Although there had been severe recessions before the war, none had been any on such a scale or for such duration. Moreover many industrialists were old and worn out by the pressures of war work. A new generation of leaders emerged, men such as Sir James Lithgow, Viscount Weir and Sir Stephen Bilsland. Together they helped form the Scottish National Development Council in 1931 to promote industry.
It was not just Glasgow's heavy industries which were affected by the slump. Prohibition of the sale of alcohol in the United States in 1920 resulted in a massive fall in whisky sales. The Distillers Company, which already owned Port Dundas and Dundashill distilleries, purchased Camlachie distillery in 1920 and acquired Yoker distillery in 1927 and shut them both.
Despite the problems the 1920s was a period of innovation with the continued development of the internal combustion engine and the extension of the use of electricity both at home and in the workplace. The pioneers of the marine diesel in the United Kingdom were Barclay Curle at the North British engine works and Harland & Wolff, which fitted out the Lancefield works for this purpose and built the huge Clyde Foundry in Govan to cast the necessary high-tolerance steel workpieces. Although the Clyde Foundry shut with huge losses in the early 1930s, more diesel engines were built in Glasgow during these years than anywhere else in the world. Several Glasgow firms turned their hand to making cars, such as Arrol Johnston and Halleys, but none were successful. The only successful road vehicle business was the Albion Motor Company, which specialised in building lorry chassis. The leading electrical engineering firm was Mavor & Coulson, which did much to promote the use of electric motors in factories and electricity in the home.
When work resumed on Ship No 534 at Clydebank in 1934 it was taken a signal that the worst of the slump was over. This was premature and it was not until re-armament began that recovery was assured. In 1937 the Scottish National Development Council took the initiative in establishing the Hillington Industrial Estate to provide modern facilities for new industries. They doubled as "shadow" factories for firms in the south of England whose works were most at risk from bombing and several were acquired for this purpose. The following year the Council sponsored the International Exhibition in Bellahouston Park as a showcase for west of Scotland industry. For all the closures, overall Glasgow's industries survived the recession remarkably intact, if under new ownership.
Because Glasgow was largely free from attacks by enemy bombers, with the notable exception of a few weeks during 1941, its industries were heavily occupied with essential war work throughout the Second World War. War production was far better organised than in the previous conflict and there was no repetition of the massive expansion of facilities. With the memories of the slump still fresh in their minds, factory owners approached the return to peacetime trading with caution. Although orders were plentiful, fear of a recession and government control inhibited new investment until too late. The re-emergence of Japan and Germany as significant competitors in early 1950s and changes in the structure of their markets spelled the end for many staple trades. By the end of the decade the first works had closed, this time never to re-open.
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