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Liverpool and Cotton


The first recorded cotton dealing in Liverpool was a newspaper advertisement for an auction of 28 bags of Jamaican cotton in 1759. Over the next seven decades a series of technological and industrial developments revolutionised cotton production. Liverpool enjoyed a physical proximity to the world centre of the industry – the Lancashire cotton towns. It also had well established trading links with the new powerhouse of raw cotton – the USA. As imports soared to the million-bale mark, Liverpool overtook London as the country’s leading cotton importer.

3 June 1757
The first recorded transaction of cotton dealing in Liverpool in the press appears
The full advertisement in the “Liverpool Chronicle and Marine Gazetter" ran as follows: "To be sold by auction at the Merchants' Coffee House, on Thursday 16th inst., at one o'clock precisely, 28 bags Jamaica cotton in four lots, samples to be seen with R. Robinson, broker." This was not, however, the first cotton to arrive in Liverpool. Small parcels of cotton had been arriving at the port for almost 50 years, albeit amongst mixed cargoes of various other goods, including sugar, tobacco, ivory, coffee and rum. The Richard Robinson mentioned above, like all of the people who dealt in cotton in this early period, was a general broker rather than a cotton specialist.
James Hargreaves invents the Spinning Jenny.

James Hargreaves Spinning Jenny.
Even after John Kay patented his Flying Shuttle in 1733, cotton production could not keep up with the demand for it. Hargreaves revolutionised this process with his Spinning Jenny, which reduced the amount of time required to produce yarn by enabling the worker to spin eight spindles at a time. As the technology improved, this figure would rise to as high as 120.


Richard Arkwright patents the Water-Frame
Arkwright's interest in the spinning and carding machinery, which turned raw cotton into thread, led to his Water-Frame. It produced a strong twist using wooden and metal cylinders, rather than human hands, whilst drawing out a carding or roving. This development meant that it was now possible to use inexpensive yarns to manufacture similarly inexpensive cheap calicoes, which was the basis for the great expansion of the cotton industry.
Joshua Holt becomes the first Liverpool Cotton Broker
The first people who engaged in brokering in cotton in Liverpool could not, strictly speaking, be called cotton brokers, as they dealt in various commodities and were general brokers. Holt began his working life a stay-maker (or corset-maker as it later became known) in Moor Street and had built up a sound knowledge of the West Indian cotton, which was being imported to Liverpool in increasing quantities. This cotton was becoming more popular with the dealers in Manchester and a number of them, recognising Joshua Holt’s abilities to judge the quality of the cotton, commissioned him to examine it as it came into the port and buy whatever he thought was of suitable quality. For this service, as the city’s first buying broker, he was paid 1% commission. It was a sign of things to come: in future it would be commonplace for dealers in Manchester and Lancashire, reluctant to face the then-arduous journey to Liverpool by coach, to commission a broker in Liverpool to purchase cotton on their behalf.
Samuel Crompton invents the Spinning Mule

Samuel Crompton invents the Spinning Mule

Spinning MuleSo-called because it was hybrid of hargreaves' Spinning Jenny and Awkwright's Water-Frame, the Mule combined the best parts of both - with 48 spindles which could produce one pound of 60s thread every day. It resulted in strong, thin yarn, which was suitable for every kind of textile.

James Watt and Matthew Boulton perfect their steam engine for use in factories
These machines, although a little slow to take off in the cotton industry (Manchester did not get one until 1879, for example), were eventually installed in increasing numbers. It would prove to be a revolutionary development. No longer would the availability of water be a crucial factor in the establishment of new mills, which could now be built anywhere where there was a plentiful supply of labour and could be installed with machinery that was all made of metal. Steam engines provided unrivalled power which was cheap to operate in Lancashire, where there were abundant coal supplies just waiting to be mined.
A Good year for the cotton industry
This was the year that Richard Arkwright’s patents came into the public domain, making it cheaper to build and modify the Spinning-Jenny; the first Power Loom, designed by Edmund Cartwright, was built; Claude Berthollet discovered how to apply chlorine to the bleaching process, which James Watt further developed a year later, thus reducing the bleaching time to a matter of days; the first steam engine was installed inside a cotton mill, in Nottinghamshire; and regular shipments of cotton from the United States to Liverpool started. By this time, Joshua Holt was no longer the sole cotton broker in Liverpool, as cotton was becoming an increasingly valuable commodity.
The first monthly "Prices Current" sheet is issued by Ewart and Ruston
At this stage, the prices of cotton were presented alongside those for a variety of other goods imported into Liverpool at the time. Cotton was not as yet important enough to warrant its own statistical information sheet, but it was significant enough to be recorded as one of the major imports into the port of Liverpool.
Eli Whitney invents the Cotton Gin
This was a mechanical device that mechanised the process of removing seeds from the cotton crop, which previously had been extremely labour intensive. It revolutionised cotton production in the USA. To give an illustration, in 1793, cotton imports from the US to Britain were 487,600 pounds; one year later, that figure rose to 1,601,700 pounds; and by 1800 it was 17,789,803 pounds. Whitney's Cotton Gin was instrumental in Liverpool's development as one of the world's greatest cotton markets. 

Liverpool overtakes London as the leading British cotton importer
Liverpool had actually overtaken London in the period 1790-1792, but London regained its primacy in 1793 and held it in 1794. When Liverpool took the lead again in 1795, however, it did so permanently. It was the emergence of the USA as the major cotton exporter that helped Liverpool cement its ascendancy. Liverpool's transatlantic trade was the basis of its international commerce and it had already established trading connections with South Carolina and Georgia, which were both important cotton regions at this time. The Napoleonic Wars saw both the curtailment of London's trade as a re-exporter to mainland Europe and the emergence of American cotton supplies to Liverpool as a crucial import. With more cotton came more brokers and more work for the existing firms in Liverpool.
Imports of American cotton exceed those from the West Indies for the first time
From this point onward, the short staple American Uplands cotton would dominate cotton imported into Britain. In 1810, 246,759 bales of American cotton were imported out of 561,173 in total (just under 44%); and in 1825, the total was 646,776 out of 894,063, or just over 72% of the total cotton imports. This served to strengthen Liverpool's advantage as the country's premier cotton importer.
The first Weekly Circular of cotton prices is published by Ewart and Ruston
With the growing importance of the rapidly-expanding cotton market came an equally expanding need for facts relating to prices, supplies, movement and demand for cotton. Brokers needed this information in order to conduct their business properly. There was a fashion for brokers to write “circular letters” to their clients, with information on prices paid, the quantities involved, and shipping news. As these circular letters became increasingly popular, Ewart and Ruston saw that there would be a demand for a more comprehensive and systematic collection of such data. Their weekly reports published details of sales, imports, prices and other related information. Very soon, all of Liverpool's leading brokers issued similar weekly or monthly circulars. The next development saw firms joining together to pool sources of information, culminating in a “General Circular” involving almost the whole cotton market with an extensive record of prices, sales, imports and stocks.
7 March 1808
Traders move from the top of Castle Street to Exchange Flags

Exchange Flags
"Monday the 7th March, of that year, was a day of much importance in the commercial annals of Liverpool, as on that day the merchants abandoned their usual place of meeting, at the upper end of Castle St, and assembled for the first time in the grand area of the New Exchange. No place in the world affords so elegant and commodious a situation as this for the purposes of a public exchange, and we have often been surprised to hear it observed that it would be difficult to bring the merchants to abandon their old situation to which they were so much attached by the strong ties of habit and early prepossession. In opposition to this common opinion, we are happy to observe that the transference was absolutely perfect the first day, not a single person being found loitering about his old haunts during the whole 'Change hours." No doubt to the relief of local shopkeepers around the Castle Steet area, under whose awnings the brokers would do business when it rained. In January 1809 the Commercial Room was opened in the New Exchange. This was afterwards renamed the News Room.
Robert Gill proposes buying cotton from sample
By this time, many inland cotton buyers, faced with the prospect of long journeys to Liverpool to inspect the ever-increasing quantities of cotton that were being imported, increasingly placed decisions to purchase cotton in the hands of brokers in Liverpool. These brokers built up an extensive knowledge of all the different varieties of cotton and were good judges of its quality. They provided a very useful service to the dealers, especially in relation to cotton from the West Indies and Brazil, whose qualities varied hugely in the amount of dirt in the lint and the length and strength of the fibres.
The arrival of cotton from America brought with it a great change. American short staple cotton was much more even-running than other varieties and the planters were quick to adopt very careful pre-shipment selection. Robert Gill suggested that the time-consuming process of inspecting cotton in bulk could be replaced by buying from samples shown on a counter. Although there was initial opposition, it was soon realized that this was a viable proposition. The brokers could do their work much more quickly, and even though they reduced their commission rate from 1% to 0.5% (which pleased the dealers), they still had more than enough work as a consequence of the increasing imports. It further cemented Liverpool brokers’ position in the cotton market.
Egyptian long staple cotton is imported into Liverpool for the first time
This cotton was of a quality that had not been seen in any quantity before, being only slightly shorter in the length of its fibres than the supplies of the best Sea Island cotton, which tended to be of limited supply. This cotton met with a very favourable reception in the spinning towns of Lancashire and it started a highly specialised trade spinning very silky brown yarns of very fine counts.


Major improvement to transport and communication systems brought crucial developments. The railways reduced the time and cost of travel and improved reliability in transporting cotton to the Lancashire towns. The Liverpool Cotton Brokers' Association was established in 1841 and it quickly established a successful system of arbitration. The Transatlantic Telegraph Cable reduced long distance communication from weeks to minutes. Liverpool broker John Rew recognised the far-reaching implications of this development and created the hedge fund system. This led to the hugely successful Liverpool Cotton Futures Market, which doubled the business of the Liverpool Cotton Market. In 1911-12 Liverpool imported a staggering 5,230,399 bales of cotton.

15 September 1830
The first railway journey from Liverpool to Manchester is made

The railways were key to the development of the Liverpool Cotton Market. It made travelling from Liverpool to the cotton heartlands of Lancashire, especially Manchester, quicker, cheaper, more comfortable and more reliable, especially in winter, when the canals could freeze. The journey between Liverpool and Manchester took four and a half hours by coach, but by rail it took just two; the cost of transporting cotton by canal to Manchester had been as much as 20 shillings per tonne; the railways charged 11 shillings. Furthermore, the transport of cotton was catered for by the railway companies, which provided heavy tarpaulins to cover the goods and built warehouses for the cotton at the end of the line. The journey for spinners going to see their brokers and vice versa fell by over 40%. The railways were extremely successful from the start; 72,000 passengers travelled on the Liverpool to Manchester line from September to December 1830 and in the following year, the line carried 445,000 passengers and 91,000 tonnes of freight. In the year before the opening of this railway line, there were 45 cotton broking firms in Liverpool; by 1845, there were 111, testament to the importance of the railways to the expansion of the Liverpool Cotton Market.
The Bank of Liverpool is founded
This opened up new sources of credit and became the most important bank to the whole cotton market. It allowed more merchants to hold cotton in Liverpool, but it was not the merchants who gained the credit from the bank; instead, the merchant would put his cotton in his selling broker's hands, draw a bill upon the broker, who then took it to the bank where it was discounted and the broker would then present the money to the merchant. It was the cotton held by the broker that provided the security to the loan. By the end of the decade, the Bank of Liverpool was making advances on such cotton of up to 80% of its market value. It ultimately meant that merchants were able to hold on to their cotton for far longer. They did not have to sell quickly (and possibly, therefore, at a loss), but could wait until they were offered what they thought was a suitable price by a spinner, who, like the merchants, was also going through a broker.

4 July 1840
The "Britannia" sails from Liverpool to Boston

The "Britannia"  Liverpool to Boston

Samuel Cunard's steamer arrived in Boston just over two weeks later, which marked the start of a revolution in the transatlantic mail service, as sailings became both more frequent and quicker, so that by 1862, the service was weekly and journeys were reduced to just over eight days. These shipping steamers were faster, more frequent and more reliable than the ships carrying cotton, which could be subject to delays while they waited to fill up with cargo and could take up to 6-8 weeks to cross the ocean. This led to a new risk to the cotton importers - falling prices due to developments in the cotton belt while the cotton was still afloat. A new system of marketing was essential to prevent merchants from risking bad news turning every purchase into a loss before they even had the chance to offer the cotton for sale.
This new system became known as the "arrivals" market. As the cotton was loaded on to the ships in the US, samples were taken from each bale and offered in New York and then Liverpool for sale "to arrive, Liverpool." The owner guaranteed that the cotton would be up to sample - it could be tested by the Liverpool Arbitration system in the event of a dispute. The existence of this arbitration system was crucial to the success of the whole system - owners could make quick sales and avoid the risk of bad news spoiling their market, or to make a profit in the event of rising prices. There were advantages for many of dealing in cotton in this way; for example, those prepared to sell at small profit margins for quick turnover at minimum risk. The turnover of the Liverpool Cotton Market increased as a result of the success of the "arrivals" market. The existence of such a market would also be crucial in the later development of the "futures" market from 1866 onward.

2 April 1841
The Liverpool Cotton Brokers' Association is founded
The regular meetings of the brokers on Friday mornings to collect information for publishing in their circulars evolved into a permanent organisation. Ninety firms joined, a figure that would expand over the years. In February 1842, George Holt was elected President, James Wrigley Vice-President and Studley Martin the Secretary. Initially, there was no fee for members; that would come in 1845, when apprentices paid 5 guineas and all others 20. The strength of Liverpool's organisation in turn contributed to its success vis-a-vis the cotton dealers in Manchester and Lancashire. The production of comprehensive information on the cotton market was sent to the spinners inland, who could then make better-informed decisions to purchase as a result. The Liverpool brokers also developed a hugely successful system of arbitration to settle disputes between buyers and sellers, quickly and simply, without the need of expensive and time-consuming legal redress. Buyer and seller would nominate a broker to represent them and if the two brokers could not agree, a third would be selected to arbitrate. It is a system which survives in essence today.
Another key to the success of the Liverpool brokers was the ease with which cotton could be bought in the Liverpool market by the spinners. Whereas purchases from dealers potentially involved the spinner in seeing several such dealers and inspecting the goods at the warehouses before finding the cotton he wanted at the right price, the brokers in Liverpool was in a position to buy from all the cotton stored in Liverpool. The spinner need only deal with one person - his broker. The process was made even easier by the development of selling cotton on sample, which enabled the broker to have as many as 150 samples available for when the spinner came to examine them before deciding which to buy.
The First Members of the Liverpool Cotton Brokers' Association: Barber, William Kershaw, William Barnsley, Godfrey and Son Law, George Barton, Miles  and Bigland Lea  and Waddington Bateson, Richard  and Sons Littledale, T and H  and Co Bateson  and Horsfall Marriott, John  and Co Blackburn, Samuel  and Co Martin, Studley Blackburn, TB Mason, Robert Bourne, Paton  and Co Molyneux, Taylor  and Co Bourne, Timothy  and Bourne Musgrove, Edgar Bower, William  and Son Musgrove, Robert  and Sons Buchanan, Daniel  and Son Needham, Samuel Buchanan  and Browne Oughterson, Arthur  and Co Bulley, Samuel Peers, John  and Sons Bulley, William, Junr Peers, William  and Son Campbell, Colin  and Son Percival  and Parton Cooke, Isaac and Sons Preistley, Griffiths  and Cox Corrie  and Co Rawlins Brothers Duksworths  and Marsden Reyner, Nathaniel Eason  and Barry Reynolds  and Gibson Eccles, Edward Richards, Silas Henry Ewart, Myers  and Co Ridgway, Joseph Farrer, William Robinson, Joseph  and Son Franceys  and Comer Rushton  and Johnson Garth, Samuel Salisbury, Turner  and Earle Gill  and Syers Shakespeare, Isaac Gladstone  and Sarjeantson Shand, Higson  andHughes Haigh, Thomas  and Co Seddon, James Haywood  and McViccar Sleddon, Thomas Hodgson  and Ryley Smith, John B Hodgkinson, JA Smith, James Houlbrooke Hollinshead, Tetley  and Co Slatter, Robert Hollins, Francis Stevenson, Hew Holt, George  and Co Stock, James  and Son Howell, James Swainson, Anthony Huson, William Tattersall  and Claire Hyde, RE Taylor, John Hyde, Thomas Unsworth, Giles Gorton Jee Brothers  and Latham Walker and Belcher Jones, Mann  and Foster Waterhouse, N  and Sons Joseph, E Montfiore Webster, Horatio John Joynson, Samuel  and Thomas Whitaker, Carter  and Co Joynson, Thomas Willis, John Junr. Irlam  and Thompson Wolstenholme, WL Kearsley, E and T Worthingham  and Cunningham Kearsley, John and Son Wrigley, John  and Sons

6 January 1854
The Great Snowball Fight at Exchange Flags breaks out

Eyewitness accounts vary as to how it all started. Some said that cotton and share brokers, traditionally bitter rivals, dared each other to a bout of snowball warfare; others insisted that a member of each side had entered into single combat, which quickly spread to a general conflagration involving over 300 combatants. Whatever the cause, the conflict was intense and almost martial in its execution; troops were organised so that some concentrated solely on making the snowball ammunition, which others would then use to engage the enemy. Snowballs flew in all directions, hats were knocked off, trodden on and generally destroyed and men were repeatedly felled, mostly from the deadly combination of a well-aimed snowball and the slippery ground underfoot. As contemporary poet John Pedler observed:
“Hats flew away, By the force of the ball, From heads that were grey, Or with no hair at all”.
Into the melee stepped Captain Grieg, Liverpool’s Chief Constable, who took a dim view of the general carnage. A mob of spectators had gathered to watch the fun, a number of windows in the Exchange had been smashed and a serious debate in the nearby council chamber had been briefly interrupted by a stray snowball. The good captain brought with him a posse of over a dozen of Liverpool’s finest, with predictable results. Affronted by being treated in what they regarded as a menacing manner on their own private ground over what was essentially good-natured sport,
“the combatants outside pelted him and his men in pitiless fashion, and, when the police seemed to be contemplating the use of their sticks, pelted them with renewed vigour”.
So reported the Liverpool Mercury; our contemporary balladeer put it succinctly:
“But, alas! 'twas no go, And the Captain soon found The bullets of snow From his cranium bound”.
The police managed to regroup and, in the face of the jeers, hootings and catcalling of the crowd, took into custody a number of the ringleaders, prominent brokers all, who were by this time “now whitened like ghosts”. Upon being released after having their names and addresses taken, the convicts returned to the scene of the crime, where they were cheered enthusiastically by their accomplices; and battle was joined, fiercer than ever.
Perhaps unwisely, Captain Grieg returned to the Exchange newsroom, home to the brokers when they weren’t snowballing each other. He attempted to explain his actions, but he “was instantly met with hootings, cries of ‘out with him’, and other marks of disapprobation.” The brokers would not listen to a word; instead, a number of them escorted him from the room, handling him rather roughly as they did so. Having seen off the Chief Constable, the brokers continued their epic battle until well after 4 o’clock, almost two hours after they had started.
As our poet remarked, neither the cotton nor the share brokers “could boast of a victory gain’d”. We leave to him to point out the real victors:
“But, remember, when brokers each other well batter, The snowballs prove friends to the innocent hatter.”

12 April 1861
The American Civil War breaks out
The drastic reduction of exports from the Southern States in the USA led to the Lancashire Cotton Famine and an increase in market speculation, with the revival of the "arrivals" market. The rapid rise in cotton prices - from just over seven pence in 1861 to just over 31 pence by July 1864 - encouraged further speculation and rumours of peace saw the price plummet just three months later to 22 pence. By the time peace was declared, it had fallen to 14 pence. Fortunes had been made and lost with remarkable rapidity - over 100 Liverpool cotton firms and two banks went out of business. One far-reaching effect of the Civil War was that Lancashire could not supply India with anything like the same amount of cloth before the outbreak of the war. This cloth famine encouraged the Indian mills to increase production, marking India out as the first serious competitor to Lancashire.
16 January 1863
A Committee is appointed to draw up a Constitution
The result was the first edition of "The Constitution, Laws And Usages of the Liverpool Cotton Brokers' Association." The rules were few and could be issued on a single sheet to be hung up in members' offices. Unfortunately, they have not survived intact, and the oldest constitution in the archive dates from 1871.
15 April 1865
Abraham Lincoln is assassinated
Reaction to this terrible event, which happened only 6 days after hostilities ceased in the American Civil War, was noted in the Minutes of the Liverpool Cotton Brokers' Association by the following exchange of letters:
Liverpool 28 April 1865 Thomas H Dudley Esq American Consul Liverpool Sir,
At the usual weekly meeting of the Cotton Brokers' Association of this Town held this morning the appalling assassination of the late President of the United States, and the atrocious attempt on the lives of Mr Secretary Seward and his son were the theme of unanimous execration and abhorrence. I have been requested to convey to you, as the Representative of the United States at this Port, the expression of deep sympathy  and condolence of this Association in common with the country at large at a calamity so awful  and which has impressed on our Body with the strongest feelings of profound regret  and indignation as well as of commiseration for a people with whom we are so closely allied in the bonds of good will as well as the daily business of our lives.
I trust, Sir, you will favorably receive this imperfect assurance that in this terrible blow which it has pleased God to inflict on your great Nation they  and you have the utmost possible sympathy of the members of our own Association, both individually and collectively.
In the absence from ill health of our own President, Edgar Musgrove, Esq, I beg to subscribe myself on behalf of this Association with all respect, Sir
Your Obt  and humble servt,
D Buchanan
Vice President of the Liverpool Cotton Brokers' Association
US Consulate Liverpool May 1 1865 to DG Buchanan Esq Vice President of Board of Cotton Brokers Liverpool
Sir, I have to acknowledge the receipt of your letter of the 28 ult as Vice President expressing of the sense of your Board at the atrocious and appalling assassination of the President of the United States and the equally diabolical attempt to murder the Secretary of State and his son.
The action you have taken and the very proper terms in which you characterize these monstrous deeds cannot be other than grateful to the Government and the Country as well as to all mankind who alike with yourselves are interested in denouncing the murders.
It was not to be expected that your board or indeed that any considerable number of people could be found anywhere who would in the least degree countenance such acts as these even if levelled at the least in the land much less when aimed at the heads of the nation with the object and view of destroying that nation. I shall take much pleasure in transmitting a copy of your letter to the Government at Washington.
I am Sir Very Respectfully Your Obt Servant Thomas H Dudley

28 July 1866
The Transatlantic Telegraph Cable becomes operational
It is impossible to overstate the significance of this development to the Liverpool Cotton Market. Messages that would take days to deliver by ship now became available in minutes, with the original speed of transmission being fifteen letters per minute. It meant a huge change for the "arrivals" market, as news was now instantaneous and the few days' grace of sightings of ships "off Lynas" was now irrelevant. A new system of trading was suddenly desperately needed.
John Rew invents the hedge fund system

John Rew
Inspiration came from a Liverpool man who had worked at the Bank of Liverpool from the age of 15 before setting up in business as a cotton broker when he was 25. He saw the possibilities inherent in the idea of the simultaneous deal. By using the cable, he could get quotations from the Cotton Belt in the USA and buy the cotton at almost a moment's notice; previously, the only way to do this was via an exchange of letters, a process which took weeks. The cotton would be scheduled to arrive in Liverpool in two or three months' time. But as soon as he had bought his actual cotton, Rew could go to the "arrivals market" in Liverpool where he sold the exact quantity of cotton he had bought speculatively, selling it for delivery far enough ahead to cover the time it took for the cotton to arrive and a reasonable period in which to sell it. So Rew had two cotton contracts, one actual and the other speculative, which had been bought and sold simultaneously.
When the cotton arrived in Liverpool, Rew sold it to his spinner and bought back his speculative contract in the arrivals market. If the price of cotton had dropped, say, four pence since his purchase, Rew lost that amount on his cotton; but he would also have made a profit of four pence on his speculative contract in the arrivals market. This is the first example of a "hedge", which showed how brokers could import cotton in a falling market without losing money and how a speculative market could be used to avoid enforced speculation.
The development of the futures marked a rapid growth in trade, doubling the amount of business which the Liverpool Cotton Market turned over and ushering in an era of unrivalled prosperity, as more and more uses were discovered for futures trading. Cotton growers could take advantage of high prices when they came rather than being forced to sell at harvest time every year; spinners could book yarn orders for delivery much further forward than previously and could avoid loss through falling prices while carrying unsold yarn stocks by selling futures as a hedge against loss.

The Liverpool Cotton Clearing House is established
Practical difficulties soon arose as a result of the huge increase in trading in the futures market. Trading took place largely in the open at Exchange Flags, with a gradual evolution into the brokers standing round a ring or pit and it was customary in this market that each account was treated separately and settled between the parties in cash. This meant that there was a constant stream of clerks moving from office to office, pockets bulging with cash, making or receiving payments. It was an obvious incentive to robbers and some clerks gave way to temptation and embezzled the money. Also, complicated futures contracts led to some unscrupulous traders using delaying tactics because they were not in a position to pay up. Joseph B Morgan proposed a solution in the form of a clearing house and, despite some opposition, his scheme was eventually accepted. The Clearing House was organised to facilitate the daily settlement of all futures accounts. Clerks met in a central place, and handed the money their firms owed to a Committee member, who then paid it to those firms who were owed the money. At the close of clearing, the Committee member had no cash left, as in the futures market there was a buyer for every contract sold and a seller for every contract bought. Clearing effectively put an end to the tactical delays some firms had used to prevent settlement.
14 April 1878
The Liverpool Cotton Bank is established
This was the obvious next step in the financial organisation of the Liverpool Cotton Brokers' Association. The dangers associated with large amounts of cash being carried - as much as £100,000-£150,000 on any given market day- had not been completely eradicated by the establishment of a Clearing House. The Liverpool Cotton Bank, a branch of the Bank of England, solved this problem by introducing a system whereby all payments were made into the Bank by cheque and the money received was paid out by credit vouchers to the firms to whom it was due. Furthermore, spinners were able to make all their cotton payments to Liverpool brokers and merchants through their own banks, as all the local banks in the Lancashire cotton towns had accounts with the Bank of England. Eventually the Bank and Clearing House were amalgamated so that all payments for futures were paid through the Bank and distributed by credit vouchers instead of cash, over the counter of the Clearing House.
Liverpool Cotton Merchants set up the Liverpool Cotton Exchange
While the Bank and Clearing House were immensely successful for the brokers, it put Liverpool's cotton merchants at a disadvantage. Some brokers started doing business directly with the shippers in the United States, essentially becoming importers in direct competition with the merchants. Furthermore, all Futures Contracts had to be settled through Clearing House, but only members of the Liverpool Cotton Brokers' Association could use this facility. This meant that merchants who dealt in futures could only operate through a broker, which meant that they were effectively being charged for brokerage twice. They argued that they should be eligible for membership of Clearing, or that the brokerage rules should be changed. They formed the Liverpool Cotton Exchange in protest and declared that they would henceforth only do business with brokers who resigned from the Liverpool Cotton Brokers' Association and became members of the new Cotton Exchange.
Some members started doing business direct with shippers in the US, without the intervention of a merchant, becoming importers in competition with merchants. The result was the establishment of the Clearing House, through which all Futures Contracts had to be settled, and the right of using the Clearing House was refused to anyone who was not a member. The merchants doing Futures business were therefore handicapped to the extent of the amount of brokerage they were charged.
The Liverpool Cotton Association is formed
Fortunately, the differences between brokers and merchants were short-lived and the two organisations merged to form the new Association. Business was simply too good to allow domestic disputes to get in the way. On 22 August 1882, the Daily Post reported:
"The controversy between the merchants and brokers engaged in the cotton trade is at an end, the scheme of amalgamation drawn up by the joint committee, with sundry amendments, having been adopted by the Cotton Brokers' Association on Wed last, and by the Liverpool Cotton Exchange yesterday.
The new Association is to be called the Liverpool Cotton Association Ltd. Its capital is to consist of £60,000 in 600 shares of £100 each, and its affairs are to be managed by directors and committees, similar to the councils and committees of the Cotton Brokers' Association. All the shareholders are to have equal rights and privileges: that is, they may be either merchants or brokers, or both."
The Spot Cotton Market amounts to 1,589,500 bales of all growths in Liverpool
The success of the use of futures market in cotton as a hedge eliminated the major risk involved in building up substantial cotton supplies - that of falling prices. Liverpool merchants, conscious of the cotton famine that had resulted from the American Civil War, began to build up a colossal stockpile of cotton from all parts of the world. This gave spinners the opportunity to make comparisons of prices and quantities, as Liverpool's spot cotton market became internationally renowned - the best in the world. The spot market increased the range and flexibility of its products and made cheaper the spinners' 'mixings', making yarn prices more competitive. It also helped the development of cotton growers in developing countries where possession of a 'money' crop such as cotton supplied much-needed finance. The rate of accumulation of this spot market was quite staggering: in 1878, stocks amounted to 372,950 bales; the increase to the 1892 figure of 1,589,500 bales represented an increase of over 400%.
4 January 1896
The Liverpool Cotton Market moves indoors for the first time in its history
Ever since brokers had traded in cotton, they had naturally gravitated towards the outdoors, oblivious to any inconvenience caused to local shopkeepers or general traffic. When they moved from the top of Castle Street to Exchange Flags in 1808, they had merely swapped one open-air space for another. On the fourth of January 1896, however, a tradition of almost 200 years was ended: the Liverpool Cotton Association moved inside to its premises in Brown’s Buildings overlooking Exchange Flags.
It was the coming of the telephone that brought an end to one of Liverpool’s more unusual tourist attractions. The cotton brokers had always required the fastest means of communication available to them in order to cope with the distribution of the rapidly-changing news within the business. The telephone brought Liverpool in immediate and constant touch with all the great financial centres of the world and the great stream of orders for the futures market. The telephone could not be operated out of doors; and some degree of peace and quiet was needed for conversations to take place. The brokers moved from the open air into the office and the indoor Liverpool Cotton Market. It was the end of an era.
30 November 1906
The Liverpool Cotton Exchange Building is officially opened by the Prince and Princess of Wales
Within a few short years, the indoor accommodation at Brown’s Buildings proved inadequate for the increasing hoards of traders in cotton futures, whose numbers continued to grow at this time. In March 1903 property was acquired in Old Hall Street which covered just over an acre. A competition was held to design the new building and from the 24 sets of plans submitted by Liverpool and Birkenhead architects, the winning entry came from Messrs Huon Matear and Frank Simon of the Temple, Dale Street. The original estimated cost was £150,000, which rose to nearer £300,000 on completion. It had the whole panoply of the very latest features at the time, including 12 electric lifts, synchronised electric clocks and a spacious main hall in the centre of which was the cotton ring, or pit. Thousands of people turned out to cheer on the Prince and Princess of Wales when they officially opened the new building, the speech of welcome being delivered in the presence of some 3,000 guests.
Liverpool imports a record figure of 5,230,399 bales of cotton of all growths

Just over 200 years ago, in 1708, the first slaver left Liverpool to return a year later with a small cargo of West Indian cotton. In that year, the total amount of cotton imported into the country – mostly through London – amounted to a mere 2,000 bales. The record import of over 5 million bales is graphic testament to the sheer scale of the growth of the cotton industry in that time. This represented the very peak of Liverpool’s achievement, which was considerable. It had replaced the capital as the major cotton importer, built itself up as the most important cotton market in the world and, in a country incapable of actually growing cotton, it had nevertheless amassed in its spot market the finest selection of cotton available anywhere in the world.


World War I was a turning point for the Lancashire Cotton Industry and the Liverpool Cotton Market. The demand for cotton in India and China was now being met by the mills of Japan and India. Lancashire could not compete with their cheaper labour and products. Its Far East market collapsed and cotton imports to Liverpool halved. Further problems came with the decimation of the American crop of 1921 by the ravages of the Boll Weevil. The Wall Street Crash of 1929 brought with it the Great Depression and the effect on the Liverpool Cotton Market was severe: in 1931 Liverpool’s cotton imports were at their lowest for 62 years.
31 Jul 1914
The Liverpool Cotton Market is closed due to the outbreak of World War I
The outbreak of war in Europe three days earlier caused a major international financial crisis in addition to the diplomatic one. Both the markets in Liverpool and New York were closed – international markets carrying open contracts for every cotton-producing country in the world, including all the participants in the war. This left a huge holding of futures contracts which had to be liquidated before the markets could trade freely, an essential prerequisite for the re-opening of the markets. Trading in futures opened again on the 6th November 1914, just over three months after war had been declared. It was an astonishingly quick turnaround and a stark contrast to what would happen in the next major war.
23 February 1916
The idea of a War Relief Fund is raised

At the Liverpool Cotton Association Board meeting of that date, it was reported in the minutes “That the President said in view of the large number of men from the market who had or would eventually join the army he had been considering the advisability of the foundation of a fund for the dependents of men from the market who fall in the war.” This suggestion was met with full approval by the other Directors and at the next meeting of the Board on 1st March a committee of eight members, including the President and Vice President, was set up to administer the scheme.
An example of the good work done by the War Relief Fund is demonstrated by the way in which the Committee dealt with the case of a widow in August 1916. The lady concerned had just lost one son, who had given her his entire earnings of 10 shillings a week before he was killed on duty. She had three sons still in the army, and a fourth who was still at school, aged 13. The Committee decided to make a grant of £6 per year, but did not inform her of the decision immediately, as they knew that when she applied for a pension, the Pension Authorities would ask her if she was in receipt of any other relief and they wished her to be able to honestly say that she was not.
26 October 1916
Staff joining the armed forces are guaranteed to be paid whilst serving
The Board of the Liverpool Cotton Association declared its support for staff fighting for their country in the strongest way possible – by guaranteeing their wages. The resolution of 26 October reads as follows:
"that every member of the staff should be allowed to join the army if they wished to do so…and that while they were away in the army, those who went from the Office, Clearing House  and Exchange Staffs would receive 2/3rds their present salary and the Estate Staffs 1/2 their present salary."
The Lancashire cotton trade slumps and the boll weevil causes havoc in the USA
The immediate end of World War I had led to a post-war boom, despite rising prices. Markets in the east had no choice but to pay the inflated prices for their yarn, the warehouses in Liverpool and Manchester were re-stocked with American cotton, the spot market in Liverpool was almost completely reinstalled and Liverpool imported 4,462,000 bales of cotton of all growths in the 1919-1920 season.
But the boom was short-lived. The Lancashire manufacturers were unable to compete with the cheap labour and thus cheap products from India and Japan. The War had forced the onus of catering for the Indian and Chinese demand on to the mills of Japan and India, whose workers and owners had gained invaluable experience in the process. They completely destroyed Lancashire’s entire export trade in cloth and yarn in the Far East. This meant a terrible reduction in turnover for the Liverpool Cotton Market, which saw imports slump to 2.3 million bales, a drop of almost 50% in one season. If this was not bad enough, the US cotton crop was decimated as never before by the boll weevil, which caused an estimated $300 million damage, reducing the crop to just under eight million bales from a harvested area of just over 28 million bales – an all-time record low yield per acre of just 132.5 pounds. The price of cotton on 1st March 1921 was 6.68 pence per pound, compared with 29.19 pence on the 17th February 1920.
29 Oct 1929
The Wall Street Crash marks the beginning of the Great Depression
The Liverpool Cotton Futures Market somehow managed to hold steady for just over twelve months, but as the depression intensified commodity prices, including cotton, eventually cracked. Futures reached 3.38 pence per pound in 1931, and in that year imports of cotton from America fell to 1.1 million bales, the lowest for 62 years.
The War sealed the Liverpool Cotton Market's fate. U-boat attacks and the bombing of ports and cities threatened cotton supplies and resulted in drastic action. The Government took responsibility for purchase and distribution and the Liverpool Cotton Futures Market closed. After the War the Raw Cotton Commission became the sole importer and distributor of cotton. The Cotton Market reopened in 1954, but as a shadow of its former self. In 1963 the Liverpool Cotton Association successfully reinvented itself and re-energised its membership, concentrating on the provision of specialist services such as arbitration. The Association became increasingly global in its outlook and this was reflected in its name change in 2004 to the International Cotton Association.
September 1939
World War II brings in an era of "total war"
Whereas the Liverpool Cotton Association had been able to continue with ‘business as usual’ during the First World War, it was quickly apparent that this was not the case in 1939. The German U-boats proved to be a much greater threat to merchant ships in the Atlantic in this war and the bombing of the major ports and cities during the Blitz was unprecedented, as people were killed and injured in their thousands and buildings and warehouses were destroyed on a huge scale. Cotton supplies became increasingly precarious and desperate circumstances required drastic action.
31 March 1941
The Liverpool Cotton Futures Market closes
The British Government took responsibility for the purchase and distribution of all cotton supplies and revived The Cotton Control which had operated in the previous war. Those in the cotton industry recognised that the government had been left with little choice. As a pamphlet produced by cotton representatives just after the war put it: "It is appreciated that the very special and desperate circumstances of the war afforded an excuse for unsatisfactory transactions and arrangements which in peace conditions would be unlikely to occur whatever organisation was used to supply cotton to the Lancashire spinner. The obtaining of any cotton, suitable or unsuitable, even at very great loss to the Exchequer, could no doubt be justified in the circumstances." At 12 noon on 31st March 1941, the last prices were made in the ring at the Liverpool Cotton Exchange. Everyone presumed that the market would re-open as soon as the war ended. But in reality, it was the end of an era.
9 October 1945
The Government reveals its intention not to return to the pre-war status quo
A somewhat shocked Vice-President of the Liverpool Cotton Association, Walter R Brownwell, reported to the members the result of his interview with the President of the Board of Trade. The Atlee Government, elected just after the cessation of hostilities, was determined to continue to be responsible for the purchase of all raw cotton; and to achieve this, it would create a new permanent organisation, the Raw Cotton Commission, to the complete exclusion of the Liverpool Cotton Association. Cotton, it seemed, was now a party-political issue.
January 1948
The Raw Cotton Commission becomes the sole importer and distributor of cotton in the UK
The Liverpool and Manchester Cotton Associations did their best to dissuade the government from its course of action. On 2nd November 1945, they produced a memorandum addressed to the Board of trade, entitled The Import of Raw Cotton into the United Kingdom. The paper included a memorandum submitted by the Federation of Master Cotton Spinners’ Associations Ltd, and a string of telegraph cables from representatives of cotton-growing countries and marketing centres from around the world all supporting the notion of a return to the situation that had prevailed before the war. Its recipient, Sir Stafford Cripps, described the memorandum as having presented "a very good case deserving of the most careful consideration".
In essence, the pamphlet made a case for a system of free enterprise to a government whose outlook favoured state control. The result was probably inevitable. On 28th March 1946, the motion "That this House regrets the decision of His Majesty’s Government not to reopen the Liverpool Cotton Market and considers that the system of bulk purchase under state control will hamper the manufacturer, increase the cost of cotton to the consumer and deprive this country of a valuable source of foreign exchange" was defeated by 337 votes to 186.
The Liverpool Cotton Association continued to press its case. Responding to a speech made on 3 May 1946 by David Marquand, the Parliamentary Secretary to the Board of Trade, the Association produced another pamphlet, this time with the more provocative title A Warning to the Taxpayer: the destruction of a national asset. Whereas the first pamphlet had been measured and rational, the desperation of the situation led to language that was somewhat more direct. The opening paragraph spelled out the position clearly:
"The importation of raw cotton is a highly scientific business and it is therefore not altogether surprising that the uninitiated should hail Mr Marquand’s speech at Blackpool on the 3rd of May as a conclusive argument that the Government’s proposed new system can successfully replace the service rendered by the Liverpool and Manchester merchants, backed by the intricate and efficient machinery of the Liverpool market. In order to refute these ill-informed statements and prejudiced opinions, a replay is made seriatim to each point of Mr Marquand’s speech which is reproduced below."
The pamphlet reproduced extracts from sections of the American press, including an article entitled The Twilight of the Free Market by the New York Times, which wrote that
"The Liverpool Cotton Market before the last war was the centre of the greatest single international market. Every drought or rain, every local rise or fall of demand, every item in the composite information of thousands of cotton specialists all over the world, registered itself hourly on the delicate seismograph known as the Liverpool Cotton Market. This wonderful mechanism is now to be thrown aside permanently so that some government official can substitute his own judgment of what British buyers should pay for cotton."
This echoed the provocative question asked elsewhere in the pamphlet: "Did the Electors give to the Government a mandate to damage our national and international interests to this extent and to compel the Taxpayer to undertake all the hazards of a risk-bearing business for the sake of trying out an ill-informed political theory?"
In June 1946, Walter Brownwell, now President of the Liverpool Cotton Association, wrote directly to the Prime Minister, Clement Atlee to present his case. In addition to arguing on economic grounds, he also appealed to Atlee to consider the effect the decision to set up the Raw Cotton Commission would have on the employment prospects for the members of the cotton trade. He pointed out that
"In your recent speech to the Labour Party Conference at Bournemouth, you mentioned ‘Justice for All’ as one of your party’s principles. I ask you to live up to it." In his reply, Atlee acknowledged "that centralised purchase and the disappearance of the futures market will mean a reduction of the numbers employed in the cotton market. I regret that any cases of hardship should arise, but…the government feel that their decision is one which should be made in the broader interests of the cotton market and the nation."

18 May 1954
The Liverpool Cotton Market officially reopens

Cotton Market officially reopens
A change of government in 1951 offered hope to the Liverpool Cotton Association, as the Conservative Party was more sympathetic to the idea of free enterprise than the previous government. The Cotton Bill of 1953 incorporated within it the reopening of the Liverpool Cotton Market and the bill received its Royal assent on 17th April the following year. The market was officially reopened on 18th May by the Earl of Derby, witnessed by over 1,500 members, staff and guests, including over 400 leaders of the cotton trade from thirty countries from around the world.

27 February 1963
A new Liverpool Cotton Association emerges
Although trade increased quite considerably, the trading conditions were very different from those prevailing before 1939. Subsidies, duties and currency imbalances became increasingly common and meant that, effectively, there was no longer a world price for cotton, as cottons of equal value in quality could command widely differing prices according to their country of origin and destination. This resulted in a sharp decline in the Futures Market, which meant a contraction of the merchant element in the cotton market. Firms merged, as indeed did those in the milling industry, which reduced the number of buying and selling brokers. In short, the industry contracted, with serious consequences for the Liverpool Cotton Association.
The Association found itself faced with a reduction in income and a smaller number of members available to carry out those services carried out on its behalf – arbitration, appeals, value quotation committees. In 1961, a Reorganisation Committee reviewed the situation and concluded that the heart of the problem lay in the structure of the membership, which was too rigid. It was a Limited Liability Company with two types of members – Full and Restricted – with shares and votes restricted to full members. An increasing proportion of members held that status somewhat reluctantly – there was no share dividend, the shares’ value had depreciated and holding them made members liable to an annual membership subscription. A new type of membership was required if the Association was to survive.
As a result, the constitution was amended accordingly and on 27th February the Liverpool Cotton Association became incorporated as a company limited by guarantee. Restricted membership was discontinued and full membership was made available "to individuals or companies…who are resident…in the United Kingdom and engaged as principals in the raw cotton trade." Associate membership was available to individuals or companies, whether resident in the UK or elsewhere and engaged in any form of cotton or textile trading. An annual subscription replaced share-holding, which helped to ensure that the membership would be an active one.
It was recognised that the Futures Markets were unlikely to return to their former importance and that the role of the new Association would be centred around the provision of expert services that Liverpool had built up over many years of experience. The Liverpool Cotton Association Rules had been developed and maintained over a very long period and were the most comprehensive code of trading rules in the cotton world. The name of the organisation remained the Liverpool Cotton Association, but its outlook was international. In 1976, the LCA President, in an address to the American Cotton Co-operative Association, noted that the Association
"has become increasingly international in its interests and objectives and membership. It is estimated that 70% of the world exports of raw cotton, to a value of approximately $3,700 million, is today sold under ‘Liverpool Arbitration’ or ‘LCA Rules’. About 20% is traded through the Liverpool Market, and 80% of the amount so traded ($650 million) is for shipment to destinations outside the UK."

The Liverpool Cotton Association becomes the International Cotton Association
On 23 September 2004, Liverpool Cotton Association's members approved the resolution to change the Association's name to the International Cotton Association Ltd. The following month, on 8 October, at the Association's annual trade dinner, in the magnificent surroundings of Liverpool's historic St George's Hall, to an audience of more than 830 international cotton industry guests, the Liverpool Cotton Association's President, Mr Andrew Macdonald OBE, made the following announcement during his after dinner speech:


Liverpool Records Office

International Cotton Association

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