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How Good Was The Profitability Of British Railways, 1870-1912?
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How Good Was The Profitability Of British Railways, 1870-1912?

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  • Mitchell, Brian
  • Chambers, David
  • Crafts, Nicholas

Abstract

This paper provides new estimates of the return on capital employed (ROCE) for major British railway companies. It shows that ROCE was generally below the cost of capital after the mid-1870s and fell till the turn of the century. Addressing cost inefficiency issues could have restored ROCE to an adequate level in the late 1890s but not in 1910. Declines in ROCE hit share prices and investors made little or no money in real terms after 1897. Optimal portfolio analysis shows that, whilst railway securities were attractive to investors before this date, they would have been justified in rushing to the exits thereafter.

Suggested Citation

  • Mitchell, Brian & Chambers, David & Crafts, Nicholas, 2009. "How Good Was The Profitability Of British Railways, 1870-1912?," Economic Research Papers 269857, University of Warwick - Department of Economics.
    • Handle: RePEc:ags:uwarer:269857
    DOI: 10.22004/ag.econ.269857
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    2. Grossman, Richard, 2017. "Stocks for the Long Run: New Monthly Indices of British Equities, 1869-1929," CEPR Discussion Papers 12121, C.E.P.R. Discussion Papers.
    3. Campbell, Gareth, 2012. "Myopic rationality in a Mania," Explorations in Economic History, Elsevier, vol. 49(1), pages 75-91.
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    5. Dan Bogart, 2012. "Profiting from Public Works: Financial Returns to Infrastructure and Investment Strategies during Britain's Industrial Revolution," Working Papers 121304, University of California-Irvine, Department of Economics.
    6. James Foreman-Peck & Leslie Hannah, 2012. "Some Consequences of the Early Twentieth Century Divorce of Ownership from Control," Working Papers 0023, European Historical Economics Society (EHES).
    7. Dimitris P. Sotiropoulos & Janette Rutterford & Carolyn Keber, 2020. "UK investment trust portfolio strategies before the First World War," Economic History Review, Economic History Society, vol. 73(3), pages 785-814, August.
    8. Richard S.Grossman, 2017. "Beresford’s Revenge: British equity holdings in Latin America, 1869-1929," Wesleyan Economics Working Papers 2017-003, Wesleyan University, Department of Economics.
    9. Richard S. Grossman, 2015. "Bloody foreigners! Overseas equity on the London Stock Exchange, 1869–1929," Economic History Review, Economic History Society, vol. 68(2), pages 471-521, May.
    10. Turner, John D., 2024. "Three centuries of corporate governance in the UK," QUCEH Working Paper Series 24-01, Queen's University Belfast, Queen's University Centre for Economic History.
    11. Grossman, Richard, 2017. "Beresford’s Revenge: British equity holdings in Latin America, 1869-1929," CEPR Discussion Papers 12042, C.E.P.R. Discussion Papers.

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