Blackstone’s board discussed the proposed combine through the early summer. Finally in September it was resolved to sign the conditional agreement for the sale of shares to A.G.E. This was despite reluctance by some board members to become involved. They viewed the scheme with suspicion, particularly regarding the remuneration of Mr Maconochie. A minute of a meeting in November notes that the “Directors do not feel in a position to advise shareholders to give up the shares”. The reason for this caution was not entered in the minutes, but in the light of later events was certainly justified.
Whether the boards of other companies approached by Maconochie had similar misgivings is unknown. However, Blackstone’s, along with twelve other companies joined the combine:
Engine erecting shop in the early nineteen-twenties, before Spring Injection was introduced.
Stamford Museum. From an original loaned by Chris Blackstone.
During 1920 a site in Aldwych, London, opposite Australia House was leased from London County Council. Here new company headquarters, Aldwych House was built at a cost of £400,000, exclusive of interest. The building had five acres of office space on its nine floors. A new company, Aldwych House Estates Ltd. was formed to manage the new building.
The original intention of the new group was to extend the works and plant of the participating companies thereby enabling full advantage to be taken of the opportunities for development and increased efficiency of production. Centralisation of all buying and selling through the London headquarters was to be initiated so that all purchases would be made at the most advantageous prices; all sales promotion would be co-ordinated for the greatest effect. It did not work! The system was too inflexible and met much resistance from the various work’s managements who, by July 1920 had reverted to individual purchasing. Central selling carried on only until October 1922, although sales promotion continued to be handled by the Sales Director at Aldwych House.
The growth of the internal combustion engine, particularly the petrol engine, during the First World War sounded the death knell of steam reliant companies. Firms outside the group, such as Foden of Sandbach and Fowler of Leeds, looked to the newly emerging diesel engines for commercial vehicles as their salvation. A further problem for the steam companies was that the Heavy Motor Cars Act of 1923, which allowed the development of road tractors up to 7¼ ton weight, came too late to reverse the trend to internal combustion engined vehicles. This combined with the heavy taxation of traction engine users which also had an adverse effect on the group.
Production at Burrell’s was ended and the work transferred to Garrett’s of Leiston in June 1928. The Thetford plant and works were sold. However, not only members of A.G.E. suffered, all steam engine builders were affected. Clayton and Shuttleworth of Lincoln, for example, who joined in partnership in 1842, failed in 1929 and were taken over by Marshall’s of Gainsborough. Marshall’s themselves collapsed in 1933 and were taken over by Thos. Ward & Co. Events such as these should have been a stimulus for finding new business.
By 1921 Archibald Maconochie had gone, his place as Chairman being taken by Gwilym E. Rowland. Edward Barford described him as a wily tactician, a dictator with a sadistic streak who “whipped his directors into abject submission”; whose principle was to divide and rule, setting one group against another. Was his opinion coloured by wanting to be Chairman himself?
As the industrial and agricultural depression deepened so did the troubles of A.G.E. Share values had been falling since the very beginning. Between 1920 and 1931 one-pound Preference Shares fell from twenty shillings and sixpence to one shilling a penny ha’penny. The only dividend pain on one-pound Ordinary Shares had been in March 1920. Since then they had fallen to three pence.
The situation had not improved when the Blackstone board went to a meeting in London on 22nd October 1931. Attended by Rowland and the board of Bentall and Co. Ltd., of Heybridge, they were to discuss the transfer of that company’s manufacture of food preparation machinery to Stamford. It was pointed out that if Blackstone’s were to agree to this transfer they must be able to purchase, and pay for, the extra materials needed. It would be necessary to conserve their cash position instead of having to make constant contributions to A.G.E. irrespective of their accounts.
Rowland assured them that funds would be available and it agreed that the suggested transfer should take place. As it turned out after much of the plant and stock had been moved to Stamford the promised financial assistance was withdrawn. Everything was then repacked and returned to Bentall’s works. Needless to say Blackstone’s had to bear the cost of transporting it all.
At about his time a group of directors, which included George Blackstone and Edward Barford, who was then Rowland’s personal assistant, initiated an investigation into A.G.E.’s affairs. Sir Gilbert Garnsey, of the accountants Price Waterhouse & Co, carried this out. One outcome was the discovery that Rowland had, allegedly, had the gross rents for Aldwych House Ltd. transferred as loans to A.G.E. this was a breach of the Debenture Trust under which the first charge on rents was to rates, taxes, general maintenance and wages.
Barford, according to his biography, was to uncover another of Rowland’s covert financial activities. This related to the Government’s recently established Export Credits Guarantee Fund, a department set up to assist firms with their export business by financing sales which needed long term credit. Following goods being sold as “firm sales”, the fund’s definition of a “sale”, monies could then be drawn from the E.C.G.F. Because of the world trade slump several of A.G.E.’s members had stocks of unsold and in many cases obsolete machinery. Rowland, says Barford, arranged for some of this to be shipped to an agent in Argentina on open assignment and for it to appear in the company books as firm sales. Apparently a small-scale rehearsal for a much more substantial scheme which would make a huge profit. When Barford confronted Rowland with this he, Barford, was summarily dismissed. [One wonders if this was substantiated]
Just before the December 1931 A.G.M. the same group of directors wrote to shareholders stating that only Aveling & Porter, Barford & Perkins and Blackstone’s were profitable but that their profits had been used to subsidise the combine’s expenses and prop up the unsuccessful companies. They also said that for A.G.E. to recover further financing was essential to meet our accounts. Since April last we have paid to the A.G.E. £27,817. — — It is our business as Directors of Blackstone and Company limited to protect the excellent name we have always had, not only for the quality of goods supplied, but for prompt payment of our accounts. We now feel extremely anxious as we are no doubt losing that good name, partly by using extreme pressure in collecting money owed us, but more so by failing to keep our promises as to payments when due. We feel sure that the Board of A.G.E. do not wish this state of affairs to continue. — — We think the time has now come when the Board should tell us more of the financial position of the group, and whether they will be in a position to give us the necessary assistance to carry on our business in a proper manner.”
The A.G.E. Board was then, or later, in such a position. The A.G.M. due to be held in December 1931 was adjourned pending the issue of accounts up to March 31st of that year. These had still not been issued at the end of January 1932 and the following, on the petition of the company’s bankers, Barclays Bank Ltd., Sir Gilbert Garnsey was appointed Receiver and manager.
At the time of his appointment bank loans and overdrafts totalled £622,347 secured by debentures and shares in associated companies and by deposited bills. Meanwhile G. E. Rowland had fled. Directly after the A.G.M. he left Aldwych house, “pausing only to scoop up all the petty cash”, leaving no forwarding address. His confidential secretary had apparently already removed his papers. He seemed to vanish into thin air.
Not that this eased Blackstone’s serious financial situation. Clarke’s Crank and Forge Co. Ltd. refused A.G.E. credit slips and to accept further orders without an assurance that payment would be made in a short time. Blackstone presented their account to Aveling & Porter Ltd. Stating that unless the £3,034.18s.4d. be paid they would not be able to buy the material required to build the twelve engines Aveling’s currently had on order.
As no purchaser for A.G.E. could be found it was decided to wind up the combine. F.C.T.Lane was appointed Liquidator in April 1932, three months later he announce the liquidation of A.G.E. The group’s liabilities were shown to be £829,895 of which £139,029 was unsecured; assets were £644,940 less £972 for preferential claims and £618,939 for debentures, leaving £25,027 to meet unsecured claims. The total deficiency was £2,625,000.
By today’s standards these figures seem very small, but by taking inflation and other changes in monetary values into consideration it was a major financial catastrophe. George Blackstone wrote again to Rowland on 14th December 1931 to remind him of his past assurances that money would be available to meet accounts when due and stating that £17,814 was now required to settle overdue accounts. He went on to say — “We would point out that we are not asking A.G.E. to finance our business. The money required has been handed over by us on the understanding that we should be able to draw on A.G.E. when necessary".
From the beginning the group had been based on a shaky foundation and the financial leadership was suspect from the outset. Remember the concerns shown by the Blackstone board. Edward Barford later wrote that the promoters personally received “a five per cent commission, in shares, on the purchase price of every firm they persuaded to join the group”. A fact, he said, they managed to keep to themselves. If, as they had hoped, they could build up the group to a multi-million organisation they would stand to make for themselves around a million and a half pounds.
The dismantling of the A.G.E. began as soon as the December A.G.M. was adjourned. Barford & Perkins was taken over by Aveling’s who were in turn assimilated by Ruston & Hornsby of Grantham. Frank Perkins, who had been managing director of Aveling & Porter set up a small workshop in the former Barford and Perkins factory in Peterborough. With a team mainly recruited from Rochester he was to develop the very successful P6 lightweight automotive diesel engine. Production at Burrell’s had been moved to Garrett & Son of Lieston in June 1928; Garrett’s were sold to Beyer & peacock Gorton. Howard’s were sold to an American buyer. Aldwych House was sold for £350,000 and by the end of 1933 A.G.E. was no more.
The episode had been a disaster, even for the three profitable companies. Of these only Blackstone & Co. Ltd survived as an independent concern. It was to prove a very fragile independence.