Banking in The United Kingdom - 18th Century

18th Century

During this period, services offered by banks increased. Clearing facilities, security investments and overdraft protections were introduced. An Act of Parliament in 1708 restricted banks with more than six partners from issuing bank notes. This had the effect of keeping private banks as small partnerships. Joint stock investment companies were already well established, but joint stock banks did not become well established until the following century.

The Industrial Revolution and growing international trade increased the number of banks, especially in London. These new "merchant banks" facilitated trade growth, profiting from England's emerging dominance in seaborne shipping. Two immigrant families, Rothschild and Baring, established merchant banking firms in London in the late 18th century and came to dominate world banking in the next century.

Many merchant banks were also established outside of London, especially in growing industrial and port cities like Manchester, Birmingham, Newcastle and Liverpool. By 1784, there were more than 100 provincial banks. The industrialist turned banker could assist his own industry since he not only provided a local means of payment, but also accepted deposits. Here we have a parallel with the early goldsmith banking.

A great impetus to country banking came in 1797 when, with England threatened by war, the Bank of England suspended cash payments. A handful of Frenchmen landed in Pembrokeshire, causing a panic. Shortly after this incident, Parliament authorised the Bank of England and country bankers to issue notes of low denomination.