Lancaster developed at a point where the principal road north crosses the River Lune, this being the only convenient site due to various geographical limitations in the form of hills close to the sea and tidal marshes. During the Middle Ages, Lancaster became a small port serving adjacent Furness and West Cumberland districts and by the end of the seventeenth century began to profit from trade with the New World. Local people invested money in trade with the West Indies, America and Europe by purchasing shares in the shipping business and this developed rapidly by the end of the eighteenth century reaching its zenith by 1800 but immediately afterwards there came a depression. Shipping tonnage fell by more than fifty per cent between 1800 and 1803, with a slight increase in 1810 which was not maintained and remained depressed until 1825 when increase in trade and tonnage in 1835 exceeded the 1800 figure by sixty per cent, but after 1845 the figures decreased.
Prosperity of shipping enabled Lancaster to be rich due to local traders contributing produce and capital but after the 1800 decline, completed by 1820, caused local depression. Ship construction and associated industries declined. Cabinet-making decreased due to loss of markets in the West Indies which in turn decreased sugar imports. Other industries also lost export markets which had provided outlets for greater production and the newly developing cotton industry could not compensate the losses in prosperity.
These depressive conditions resulted in the collapse of two Lancaster banks. The first to close on 13 February 1822 was the business of Thomas Worswick, Sons & Company of New Street. Before this time Worswick's had been managed by Thomas Worswick (senior), well known as the issue of tokens in 1797, who died in 1804; also his sons Alexander and Robert, who died in 1814 and 1819 respectively, leaving management of the bank to another son, Thomas Worswick (junior) and his cousin Alexander Andrade. A contemporary newspaper report stated that the collapse was due to the stoppage of payments by the London bank of William Merle, Son & Company on which Worswick's drew their bills, but the true reason must have been local, since the bank of Messrs Fell, Son & Pearson of Ulverston also accounted with Merles but survived. The lack of banking experience by the proprietors of Worswick's must have undermined public confidence at a critical time and doubtless the existence of one man at the bank with the necessary experience would have saved the bank and its customers. Management experience was of great importance and considering neither Worswick nor Andrade were more than thirty years of age coupled with the fact of depositors demanding cash in gold or Bank of England notes it is not surprising these two factors led to the bank's collapse. On its failure Worswick's owed about £300,000 and by 1841 creditors had only received 9/4d (46p) in the pound.
Four years later the second Lancaster bank failed. This was the company of Dilworth, Arthington & Birkett who closed on 10 February 1826 owing £117,565, and by 1861 dividends amounted to 7/8d (38p) in the pound. The partners, more experienced were John Dilworth and Robert Birkett, both founders and a junior partner, Robert Arthington, who came from a Yorkshire family with banking interests. The reason for failure was common for the time, insufficient assets to meet the run for cash. Also the collapse of Worswick's may have weakened the position of Dilworth's bank. On the same day that Dilworth's failed a run for cash occurred at Gibson, Pearson & Wilson's bank at Kirkby Lonsdale but this bank being in a much better financial position was able to withstand the strain.
These bank failures of 1822 and 1826 coupled with a depression in trade were extremely serious for a small town such as Lancaster in comparison with a larger trading centre like Liverpool. Lancaster possessed few large scale businesses and retirement due to financial difficulties had impact on the local community by businesses closing and causing unemployment. But in a larger place such as Liverpool more available capital led to stabilisation of business partnerships and the effect of bank and business failures had less impact on local trade due to a large number of businesses remaining.
The two Lancaster banks having been founded by merchant families during an era of mercantile prosperity were sensitive to success or otherwise of merchant trading. The combined effect of these two failures stunned the local population and personal savings disappeared. The Port Commissioners of Lancaster lost accumulated tonnage dues of £468 9s 5d in 1822 and had to borrow Trade Tax money to continue. In 1826 mortgagees interest payments were suspended. The Steam Navigation Company lost over £2500 deposited for payment of work on their new ship John O'Gaunt then under construction by Caleb & James Smith of Liverpool, who incidentally built the first P&O steamer, William Fawcett.
Obviously this state of affairs could not continue and a public meeting called on 13 February 1826 eventually led to the opening of the Lancaster Banking Company on 23 October 1826. For many years it was believed the new bank to be the first join-stock bank in England but this is no so as the Bristol Old Bank was the first to be established under the Act of 1826, on 16 June 1826. Although the Bristol company had been a private bank prior to 1826 it only had a small number of shareholders. The Lancaster Banking Company was, however, the first new join-stock bank to be established under the 1826 Act and possessed a much larger number of shareholders, a feature of most joint-stock banks.
After the Lancaster meeting of 13 February, a Deed of Co-Partnership was drawn up with the nominal capital fixed at £300,000 in £100 shares, and partnership to continue until 1 January 2001 unless previously dissolved. There were seventy-eight signatories to this Deed with subscriptions of 2,230 shares of £100 each. The Bank was established on 9 October and opened for business on 23rd October, initially in premises formerly occupied by Messrs Dilworth in Penny Street, then later, in 1827, moved to its present site into a building previously occupied by Messrs Worswick's in Church Street. This building was in turn replaced by the present premises, built in 1870 and furnished by the local firm of Gillow & Company.
Five directors were appointed. Leonard Redmayne (the first chairman) George Barrow, John Armstrong, John Fearnside and James Crosfield. Redmayne held the position of Chairman until 1860. The first Manager was John Coulston who obtained much first hand information on banking techniques in Scotland. Any entry in the directors minute book reads "Mr Coulston be authorised to go to Scotland to procure information as to the mode of book-keeping and of transacting business in some of the principal banking establishments there and to prepare proper books if he can do so with advantage to the company". John Coulston died in 1866 after giving forty years service to the bank.
Early success of the Bank is evident from the first Annual General Meeting in January 1828, which declared a profit of £4,347 and a dividend of 5% on the paid-up capital. In 1828 a branch was opened at Chorley followed by another at Kirkham and Ulverston in 1829. The first two were later closed, but the Ulverston branch was highly successful, serving a large community in the Furness area. By 1837, business was transacted from Lancaster, Preston and Ulverston. Reports in the mid-nineteenth century showed steadily increasing profits reflecting increase in business. The number of shareholders also increased from 129 (1837); 184 (1853); 980 (1884) and 1420 (1902).
On 4 May 189 the Bank was incorporated as a limited company under various companies Acts from 1862 to 1890 and on 27 November 1896 the title was registered as the Lancaster Banking Company Limited. By 1906 the Bank had maintained its separate existence but in November 1907 it was amalgamated with the Manchester and Liverpool District Banking Company. The Lancaster Bank shareholders then received District Bank £3 shares with a market value of £49 each. The Manchester & Liverpool District Banking Company became the District Bank in 1924 and then in 1970 integrated into the National Westminster Bank, who still occupy the original Lancaster Banking Company building.
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