COMPANY MEETING

WESTMINSTER BANK LIMITED

DIVIDENDS MAINTAINED THE ECONOMIC SITUATION THE HON. RUPERT E. BECKETT'S ADDRESS

THE Annual Ordinary General Meeting of Westminster Bank Limited was held on Wednesday at the Head Office, Lothbury, E.G. The Hon. Rupert E. Beckett (Chairman) presided.

The Chairman said that the only change in the Directorate was the resignation of Lord Runciman on his re-entering the Government.

THE BANK'S ACCOUNTS

The Balance Sheet showed a drop in Current, Deposit and Other Accounts of over £22,000,000, but this decrease at December 31st was fortuitous, and the average for the year showed a materially higher figure than in 1937. The big movements in deposits, which had occurred only in those offices where such fluctuations were to be expected, had arisen out of the abnormal conditions prevailing during the past year, and included the loss of foreign deposits in sterling. The increase in advances during 1937 did not continue in 1938, and the figures for the year showed a decrease of £2,300,000.

The profit for the year amounted to £1,557,161, which, in view of the critical events of 1938, the diminution of world trade, and the lessened resources at the Bank's disposal, was to be regarded as satisfactory. The dividends were maintained, at 18 per cent. on the partly-paid shares and 124 per cent. on the fully-paid shares, but it was not possible to repeat the bonus paid last year. £300,000 was allocated to the Officers' Pension Fund and k too,000 to Premises Account, and L526,000 was carried forward, against £496,000 brought in.

THE ECONOMIC SITUATION The pause in economic progress perceptible in the closing months of 1937 developed, in the early part of last year, into a definite recession, and fears were widely entertained that we were on the downward path to severe depression, especially as the unfavourable economic influences were rendered more formidable by the acute political tension. Again a stage was reached, however, though at a lower level, when little perceptible change was visible, and for more than half a year, business as a whole neither advanced nor receded. It was in this state of moderated activity that we still found ourselves today. For more than five years, the Board of Trade's index of production, allowing for seasonal variations, had moved consistently upwards, but last year the average for the first three quarters was 6 per cent. lower than in 1937. The composite index of business activity published by The Economist averaged 112 (1935 = zoo) for 1937 and 1044 for the first eleven months of 1938. The total of unemployed, after a sharp increase of 420,000 between October, 1937, and January, 1938, had shown no decisive movement either up or down, and the numbers of those in employment, though also varying month by month, showed little change in the latest total from that of a year ago.

The fortunes of individual industries were largely conditioned by the degree of their dependence upon exports, and although a falling- off in home trade had been seen in some directions, it was in overseas trade that deterioration had been most severe.

TEXTILES, IRON AND STEEL

The textile industries were among the worst hit, and exports of cotton and woollen and worsted goods were about 25-3o per cent. less in volume than in 1937. Some indication of the retrogression of the cotton trade in the past two years was afforded by the fact that, after the elimination of over 41 'million spindles, the excess capacity was greater today than when the process was begun. In the wool textile industry, raw material values were on a lower and steadier basis during the year, but the disturbance of overseas markets greatly impeded progress, and the home demand showed no com- pensating increase. The rayon trade experienced a very moderate demand for its products, but there was a slight improvement towards the end of the year.

For the first time since recovery from the general depression, production in the coal industry and in the iron and steel industry was last year less than in the preceding year. At home, coal con- sumption was well maintained, but exports were II per cent. below those in 1937. The total production of coal, at 229,000,000 tons, was lower by approximately r t1 million tons. The output of steel at 10,394,E tons, was 2,590,000 tons (or zo per cent.) less than in 1937. A recovery in the fourth quarter of the year would probably have been greater, had not buyers been anticipating price reductions at the year end, which had now been announced. At 6,-763,000 tons, Pig-iron production showed a fall of 1,731,000 tons, or 2) per cent. Engineering, which had been fairly flourishing, became somewhat less active in the closing months of last year, but certain important

branches remained busy. This was one of the tew major industries able to improve on its export figures for the previous year. Ship- building had slipped further into depression, with private orders dwindling almost to vanishing point. Admiralty work was thus a very welcome support, but a great many yards remained bare of orders. Throughout the year, it had been difficult to secure employ- ment for vessels, and freight markets, after a great upward bound in 1937, had followed an irregular course, at a considerably lower level, rates being on an average 28 per cent, below those ruling in 1937. The year was a disappointing one for agriculture, with few favourable developments to offset many adverse features. Whilst tribute might be paid to the Government for its efforts in various ways to assist agriculture, there was still much to be accomplished, not least in order to secure the maximum production of home-grown produce, as a measure of defence.

DECLINE OF EXPORT TRADE

This country had inevitably been a heavy sufferer from the shrinkage of world trade, though our import and export trade had sustained a somewhat smaller reduction than that of the world as a whole. Thus, while the value of world trade in the first ten months of 1938 fell by 13 per cent., that of our own fell by 8 per cent. The economic evolution of the world had considerably diminished the demands of other countries for many of our products, while not sensibly lessening our dependence upon imports. A marked expan- sion of our home trade in recent years had enabled us not only to maintain but to increase substantially our total production. But for us, who had relatively few indigenous products, home trade could never take the place of export trade, because we must buy abroad, and in order to buy we must sell. The contraction of our overseas trade last year had been accompanied by an important change in its balance. The gap between imports and exports had narrowed by £43 million, but our invisible exports, arising mainly from our shipping, banking, insurance, and kindred services, and income from overseas investments, had suffered some reduction through the diminished activity of international trade. There was thus every probability that our income from exports and from these other items would have failed to c wer payment for our imports by a margin not greatly different from that of the previous year, which according to the estimates of the Board of Trade was £52 million.

The substantial deficits in our overseas trading for three years in succession gave legitimate cause for concern, even though they had arisen partly out of abnormally large and essential imports for rearmament purposes, which of course produced no compensating exports. We could not go on indefinitely buying more than we could pay for, without making inroads upon the capital accumulations of past years, and to rectify this position, as most of our imports could not be excluded to any significant extent, it was vitally necessary to expand our exports. The strain upon sterling resulting from the heavy excess of imports over exports had been intensified, in this era of sudden alarms and upheavals, through the movements of fugitive capital. The Exchange Equalization Fund had proved its worth as a defensive weapon, and without the assistance of this great buttress to our exchange, it would have been impossible to withstand onslaughts on the unprecedented scale recently experienced.

INTENSIFIED FOREIGN COMPETITION

The past year had seen certain developments which had not only intensified existing trading difficulties, but created others, and the problem of retaining some of our old markets was becoming as difficult as that of finding new ones. Our trade with certain countries which owed their development largely to British capital investment in the past was threatened with extinction. The " ()pen door " in China had been closed, and promised to be bolted and barred ; in Mexico, the arbitrary expropriations of the Government had created a very unfavourable impression, and prejudiced our exporters in future trade enterprise with that country. In many other countries where British interests were well established, particularly in South- Eastern Europe and South America, they had been seriously jeopardised by the intrusion of political considerations and influences into the economic sphere. Fair competition British traders could meet, but today the destination of business was frequently decided not by competitive efficiency, but by political manoeuvres and con- siderations of national expediency. A new, and more subtle, form of trading had come into vogue, in which one country undertook to absorb another's output of a particular crop or material. A primary producing country naturally found the prospect of securing an assured market for its products an alluring one, but in practice the interchange had proved to have considerable drawbacks. The dominant partner in the agreement, whilst itself receiving much- needed raw materials, had been able to dump inferior or unwanted goods on the other. In addition, the latter had found itself deprived of the foreign exchange that would have accrued if its goods had been sold through normal channels. But these were the lesser evils. Far more important was the sacrifice of freedom of action by the smaller country, bringing it under a sort of economic hegemony, which might eventually lead to a political hegemony. In the development of these new trading methods, the whole resources of the totalitarian States could be marshalled behind their traders. To all intents and purposes, the State was the only seller and the only buyer ; the State was a manufacturer in bulk, paying wages fixed by itself ; capital and labour could be transferred without a moment's delay from one part of the economic organization to another ; rapid decisions could be made without the necessity for consultation among all the parties concerned ; and if the interests of the State as a whole demanded it, goods could be either sold below or bought above world prices.

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COMPANY MEETING

WESTMINSTER BANK LIMITED (Continued from page 151)

NEED FOR NEW METHODS

What weapons had we with which to counter competition of this description—a competition utterly different, not only in magnitude but in kind, from any we had been accustomed to meet in the past The Secretary to the Department of Overseas Trade had said that if the countries concerned continued to employ these unorthodox methods then we should fight them at their own game, and if we fought we should win. These words would have to be backed by deeds. The lack of success that had attended our efforts hitherto made it certain that the old methods must be overhauled, and new and novel methods might have to be devised and practised. All the advantages did not lie with our competitors. Our financial resources and our free exchange gave us a decided pull. Neither those who sold to us nor those who bought from us need fear exchange difficulties.

We were still the world's greatest buyers, and our importers were free to operate in any market. In selling, we could perhaps learn something from our competitors, without adopting all their methods. Their bulk selling, under the irgis of the State, would have to be countered by bulk selling on our part. Our industries could not hope to compete successfully in foreign markets unless each was organised to speak, to negotiate, and to bargain, as a unit. Such a course would afford great scope for economy, and the pooling of resources, information and market knowledge would enable a more efficient and progressive service to be established. In the past, the loans which we had made to developing countries abroad had paved the way for an increase in our trade, but the virtual cessation of such lendin had deprived us of this valuable aid.

Various organisations of industrialists and traders had devoted much attention to the study of methods whereby the whole of our export trade might be revived, and their recommendations would no doubt receive careful and sympathetic consideration in official quarters. Meanwhile, the Government had extended the Exports Credits Guarantee Scheme, which in the past few years had been instrumental in attracting a substantial volume of trade to this country, and had concluded a number of important trade agreements, which should effect a broadening of our trade. It had lately become evident that even totalitarian countries were more keenly alive to the need for increased export trade, although the aim of self-sufficiency still governed their policies. Concentration upon indigenous pro- ducts must deny to their peoples the enjoyment of a great variety of articles available outside their own borders, this denial being part of the price paid for self-sufficiency. Substitutes exploited in these countries were usually less satisfactory, and far more costly to produce, so that not only was the range of goods available restricted, but the goods themselves were relatively dear. The standard of living had undoubtedly been depressed, and it was well to bear in mind that debasement of the standard of living was an inevitable breeder of discontent among peoples, which many times in history had been responsible for national upheavals. History also taught, however, that hardships would be endured over a prolonged period before the weight of sheer necessity forced a change.

ANGLO-AMERICAN TRADE AGREEMENT

A bright feature of last year's events was the conclusion of the trade agreement between the United Kingdom and the United States. These two countries together were responsible for more than a quarter of the world's imports and exports, and any arrange- ment calculated to promote the freer exchange of goods between them must necessarily have a profound influence favourable to the development of world trade as a whole. In the existing unsettled state of the world, the moral and political implications of the treaty could not be ignored. It was a triumph of compromise. It showed that two nations, one with a long record of tariff protection and the other charged with the safeguarding of the trade of a great Empire, were nevertheless willing to make substantial concessions of par- ticular interests, in order that the currents of trade might be made freer. And although the treaty itself was concerned solely with matters of trade, its successful conclusion inevitably drew the two nations together in a closer sympathy. It was this spirit of accommo- dation—of " give and take "—which was so essential in international, as in other, relationships.

To venture upon forecasts or theories would be out of place in the world of to-day, where so many unorthodox conceptions of human relationships were in the ascendant. Two outstanding and vital problems confronted this country. For national safety, perhaps even for national existence, we had to expand our armaments to make up the leeway between ourselves and those States which had not hesitated to scrap orthodox national economy in the relentless pursuit of military efficiency in all its branches. Secondly, our internal means of subsistence being so limited, we must at the same time keep going such a volume of overseas trade as would pay for the food of our people and the necessary materials without which this country was frustrate and immobile. It was only by preserving our foreign trade that we could maintain our national economy, upon which the Empire had been founded and developed. These were formidable burdens indeed, but we could rely upon the courage and resolution of the nation successfully to bear the load.

The Report and Accolints were adopted and other formal business transacted.