COMPANY MEETING

WESTMINSTER BANK LTD.

THE HON. RUPERT E. BECKETT'S REVIEW

THE annual ordinary general meeting of Westminster Bank, Limited, was held on January 26th at the Head Office, Lothbury, London, E.C.

The Hon. Rupert E. Beckett (Chairman) said that the balance- sheet showed an increase in Current, Deposit and Other Accounts, at December 31st last, of close upon £1,000,000, but the average deposits throughout the year, which formed the basis of the Bank's earning power, had been £22,000,000 in excess of those for 1936. The weekly average deposits of the eleven clearing banks were higher by £71,000,000, following an increase of some £140,000,000 in the previous year. The past year had at last seen the broadening of the credit base and consequent increase in bank deposits accom- panied by a corresponding demand for advances, which showed a welcome expansion of L'Ir,000,000. Almost the whole of this had been provided out of short-term money, and the higher rate of interest thereby obtained had naturally improved the Bank's earning capacity.

The profit for the year, at £1,750,589, was the best declaration since 193o. After payment of the usual dividends, £200,000 had been allocated to Bank Premises Account as in 1935. The cumulative net effect of transfers to this account over a period of years was to enable it to be carried in the balance-sheet at a figure little in excess of £5,000,000. The directors had felt justified, without serious depletion of the carry-forward figure, in declaring on the partly-paid shares a bonus of 2 per cent., which was not to be regarded as a restoration of the dividend to the zo per cent. paid on these shares for some years before 1931.

THE ECONOMIC SITUATION.

The chairman said that it was more than usually difficult at the present time to define the exact stage in economic progress which we had reached in this country, and to attempt to forecast the future course of events would be futile, in view of the many imponderable factors, and of the rapidity with which changes come about in the modern world. Nevertheless, a study of the available data relating to the many spheres of activity did yield sufficient information on which to base a reasoned judgement. The history of 1937 was one of continued progress during the greater part of the year, succeeded by a slight but perceptible pause in the closing months. The peak of our progress was reached in the early autumn, up to which time almost all the generally accepted business indices had a favourable trend, reaching the highest points achieved since the depression, and in some cases the highest ever recorded. Industrial production, as measured by the Board of Trade, continued to increase, being on the average 8 per cent. greater than in 1936, and it was particularly satisfactory that almost every branch of industry included in the calculation of this index shared in the expansion. Our overseas trade moved up steadily each month as compared with the corres- ponding month of the previous year, the year's imports showing a rise in value of 21 per cent., and exports one of 18 per cent. The relative expansion of the two sides of our overseas trade had, however, been obscured by the rise of prices, for whilst our imports increased in volume by 6 per cent. in the first nine months of last year (the twelve months' figures not yet being available), our exports were as much as. 12 per cent. larger. The employment situation continued to improve over most of the year, the decline in the number of unemployed from January to September exceeding 28o,000, whilst every month until August saw a fresh record created in the total number of persons in employment. The figures for the last three months showed a reversal of this favourable movement, but never- theless, the final statistics for the year, with a total of 11,437,000 in employment, remained some 200,000 above the comparable figure for 1936. Railway traffics registered an advance in gross receipts for the year of £7,000,000, or 4f per cent. Retail trade, though showing some regional variation, was on the whole substantially larger, and indUstrial profits had a rising trend.

BRITISH INDUSTRIAL PROGRESS.

The experiences of the main industries of the country had been varied. In agriculture, nearly all crops were smaller than in 1936, but farmers had been compensated to some extent by the improved prices realised for their produce, thanks partly to the operation of the various marketing schemes. There was a slight reduction, last year, in the number of men regularly employed on farms. It was in the heavy industries, and especially iron and steel, that progress had achieved its greatest momentum. The total of pig- iron production, at 8f million tons, was a record for post-War y4.-..trs, and the output of steel, at nearly 13 million tons, was the

largest ever, recorded. The return of prosperity to the iron and steel industry had enabled it to overtake arrears of maintenance, to effect improvements, and to make large extensions. The coal industry also had continued its forward movement, the output having risen by 5f per cent., following an improvement of 3 per cent. in the previous year. Exports bad increased by 6 million tons last year, to 40f million tons, the highest figure attained since 1931. The engineering trade was very busy, many sections working uninterruptedly at high pressure, and the reserve of work carried over into the new year ensured a further period of good activity. Shipbuilding had benefited considerably by the receipt of a large volume of mercantile orders early in the year, but later, high costs had tended to slow down the placing of contracts. Good orders in respect of the naval programme were given out during the year, and made a welcome addition to the work in hand, but still only two-thirds of the industry's total available berths were occupied at the close. With the continuance of internal co-operation in The shipping industry, owners had experienced a satisfactory year, freight rates having averaged about 5o per cent higher than in 1936. Both the cotton and the wool textile. industries opened the year encouragingly, but had not maintained their early promise. Raw cotton prices had a rising trend in the opening months and sales were then satisfactory, but reaction set in and business became dull and difficult, the export trade being seriously affected by the disturbed international situation. Further steps in the internal reorganisation of the industry had been taken during the year. The wool industry was exceptionally busy for a time, with values rising rapidly, but buyers operated much more cautiously in the second half of the year, and business was more subdued.

The recession in business activity in the closing months of last year, in conjunction with a similar but more severe experience in the United States, had occasioned fears that the process of recovery which had gone on without serious interruption in this country for almost exactly five years was coming to an end,' and had caused some impairment of that confidence which was the essence of business prosperity. It was important, therefore, to dispel un- warranted fears. A feeling of uncertainty had received its first apparent justification in the autumn in the publication of unfavourable unemployment returns, and the existence of a setback to our pre- viously unchecked progress was confirmed by other statistical data. That our recovery could continue indefinitely, without intermission, was not to be expected, and the movement recently perceptible was at present only a slowing-down of activity, liable to atm:I exaggerated attention when it succeeded a long poriod of unbroken progress. The steadiness of our recovery from the depression suggested that it was of a permanent and long-term character, much more likely to endure because of its gradual growth. In no field of activity was sentiment more quickly translated into terms of prices than in the stock markets, and unfortunately move- ments of stocks and shares received an altogether undue prominence in spheres where they had only a limited relevance, causing a restriction of enterprise in the commercial and industrial spheres.

THE AMERICAN RECESSION.

The decline of confidence, which made its first appearance in this country in the stock and commodity markets; owed its origin in a large measure to a similar development in the United States. Senti- ment throughout the mercantile world was affected more by develop- ments in the United States than by those in any other country, owing to the fact that, with a population of 140 relillioii, she was at once the world's largest consumer of many commodities and the largest producer of many others. This was strikingly illustrated by the decline of commodity prices in recent months, which had been due largely, and in some cases almost entirely, to a cessation of American buying. In America, business activity had suffered a much sharper and more severe recession than that seen in this country, and although there were certain superficial similarities in our situations, there were fundamental differences of great import- ance. Many factors had played their part in bringing about the change in American sentiment, from the optimism prevailing in the early part of the year to the apprehension that had so seriously restricted business enterprise in the past few months. A troubled political atmosphere, in which the administration and the legislature had not always appeared to be in complete harmony ; an apparent indecision in Government policy ; antagonism between the Goiretn- ment and " big business ' ; serious labour 'disturbances ; an unbalanced budget, despite heavy taxation, which was not universally regarded as satisfying the canon of equity ; all these were factors tending to undermine confidence.

Even for a country accustomed to sharp fluctuations, the present recession had come upon America with exceptional suddenness, for industrial output and trade activity had been greater in the first half of last year than in any similar period since 1929. The recovery, however, was over-dependent upon the stimulation afforded by Government expenditure on public works, and when this'stimulant was withdrawn, there' ensued a sharp decline of activity. This decline was accentuated when Government retrenchment was followed by the abandonment by many business concerns of pro- grammes for expansion. A collapse of the commodity markets, following on abnormal activity and inordinate rises in the spring, was another symptom of the complete change of sentiment. Fortu- nately, recent news from the United States had been more encourag- ing, and the view was gaining ground that the next few months would see a resumption there of the recovery movement. More n1 aortant than any other single factor would bethe relations between the American Government and business interests, and it was upon the resolving of their differences, and the growth of a spirit of

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WESTMINSTER BANK LIMITED

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co-operation between them, that the future prospects not only of America, but of the whole world, largely depended.

BRITAIN'S STRONG POSITION.

It was natural to find the influence of economic variations in America most strongly marked in our own country, and in the sensitive security and commodity markets, although price movements in London were usually within narrower limits than those in New York. According to precedent therefore, the present reaction should have no more than a partial reflection in our markets. If American adverse influence was so powerful, much depended on the measure of resistance that could be opposed to it, and this in turn depended largely on the inherent strength of the established economy of this country. In this respect we were fortunately well placed. With each year of growth, recovery had taken a firmer hold, sending its roots deeper and wider. During the past five years, industrial production had increased by nearly 5o per cent., and was nearly 25 per cent. above the previous peak of 1929. In the same period, industry had absorbed two million additional workpeople. Our overseas trade, though still greatly handicapped on the export side by world-wide restrictions, was about 43 per cent. higher in value and about 17 per cent. larger in volume than in 1932. Numerous other statistical data could be adduced in illustration of the very substantial progress made over these years. Only in the closing months of last year had signs of halting become apparent.

It had been urged in some quarters that our present trade prosperity was due to rearmament. This argument was not tenable, however, for a good measure of prosperity had been established before the rearmament programme was embarked upon, and the increased expenditure, though large in actual amount, represented but a fraction of ihe total output of industry. Another factor making for stability was the relatively large purchasing power of the wage-earning section of the community, owing to the marked rise in recent years in the numbers employed in industry. Moreover, participation in the enhanced prosperity of the past few years had not been confined to the wage-earning classes ; the standard of living of the community as a whole had steadily improved. A very broad indication of this development was afforded by the big expansion of our imports, in both value and volume. The demand arising out of armament needs had also contributed in an important degree to the enlargement of our imports, and such imports did not give rise to compensating exports.

NEED FOR INCREASED EXPORTS.

The improvement in the common welfare of the people was to be welcomed, and rearmament was a necessity, yet both had far-. reaching implications in the economic sphere. Our imports last yeas cost £113i million more than in 1936, and the increase of £95 million in our exports, satisfactory though it was, was sufficient to pay for little more than a half of the additional imports. The gap between imports and exports had thus widened by £86 million, and when our receipts from invisible " exports had been taken into account, our trade balance would be more heavily adverse than in 1936, when the net debit had been estimated at £19 million. Failure to pay for our imports for two years in succession emphasised anew that intensified efforts must be put forth still further to expand our overseas markets. For many years now, the proportion of our total production absorbed by exports had been declining. To some extent, this was an inevitable process in the country which was first in the manufacturing field and had since taught the world to produce for itself, but it was one whose pace could and must be minimised. Our home market today was flourishing, but if it was prospering, even to a limited extent, at the expense of export trade, this was a price we could ill afford to pay. Our essential dependence upon imports for so large a part of our food and raw materials made the further development of export trade an inescapable obligation, and the combined energies of government, manufacturer, merchant and banker, must be devoted to this end. British industry had been enabled through the years of prosperity to readjust its organisation and enhance its efficiency, but to widen its scope it would have to look increasingly abroad. The immediate outlook for export trade continued to be favourable within the limits still imposed by outside influences. Prices of primary products, though finishing the year below the highest points touched, were on the average substantially above those ruling in 1936, and the enhanced incomes of primary producers favoured an expanding demand for manufactured goods in the satisfaction of which we should participate.

In recent years, economic progress had everywhere been over- shadowed by political developments, as had been forcibly brought home to us on more than one occasion during the past twelve months. We owed a debt of gratitude to those in charge of our destinies, who so far had preserved this country from active embroilment in the lamentable events that we saw around us. It was the heartfelt wish of every one of us that they might meet with continued success in the hard task to which they were devoting their energies. The Chairman concluded by saying that he had put forward a plea for sober judgement of our economic position, and had endeavoured to show that to take alarm at this juncture was harmful and unwar- ranted. Our pace had slackened, but our reserve of strength and our stamina should sustain us through the present vicissitudes and enable us fully to play our part whatever the future might have in store for us.

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