Joining Forces
British companies, since the nineteenth century, had faced increasing competition from overseas. Germany, Italy, the USA, and other countries with growing knitting industries, started to impact on the sales made by British manufacturers.
Wolsey stockings
The development of the Italian machine building industry, the availability of cheap labour and EEC grants, led to the development of a significant knitting industry in Italy. Cheap Italian goods sold across Europe and the USA.
The era of takeovers (1960s)
The difficult trading environment weakened many companies. Staff costs were increasing, stocks were increasing, some areas of production had experienced losses, and customer relations were becoming more strained. Low profitability and depressed share prices left companies open to the threat of takeover. Between 1957 and 1970, Courtaulds, a yarn manufacturer, took advantage of the state of the industry and began to build a textile super-company through a series of takeovers. The theory was that once control of a company had been secured, Courtaulds could ensure that it supplied the company's nylon yarn. Famous names taken over by Courtaulds included I. & R. Morley, Brettles, Wolsey, Meridian, and Aristoc. Courtaulds had by 1968 taken control of around 20% of the knitting industry. The expansion plans of Courtaulds also included companies in the Lancashire cotton industry and major warehousing firms.
Courtaulds was not the only company to expand through takeovers during this period. Courtauld's rival yarn supplier, Coats Paton, also bought out several firms in the knitting industry. Byfords, the Driver Group, Pasolds and Jaeger all fell to become part of the Coats Paton group. The expansion of companies was not just restricted to yarn suppliers, companies within the knitting industry played a role in the takeover activities. The Djanoglys (Nottingham Manufacturing Company) took control of nine companies between 1960 and 1972, creating a group of companies that employed 10,650 staff.
Takeover troubles
The strategy pursued by Courtaulds and Coats Paton failed to achieve the anticipated outcomes. The problems of managing diverse companies, at a difficult time in the industry, did not lead to a long term revival of the industry. The assumed sales of yarn to the acquired companies did not materialise as Courtauld's companies fought to retain their ability to choose who they bought their yarns from. The performance of the merged companies in comparison with independent companies is highlighted by the payroll figures between 1969 and 1983. Courtauld's workforce went from 22,746 to 11,886 and Coats Paton declined from 12,954 to 5,732. Both companies cut their work force by around 50%. The workforce of leading independent chain store suppliers only declined by 0.5%, from 21,728 to 21,610. Employment peaked in the knitting industry at 159,000 in 1973-4.
A management consultancy report produced for Courtaulds in 1983 identified that there were key weaknesses in the business. The Meridian knitwear division was seen as uncompetitive and its profit margin on sales to Marks & Spencer was only 6-7% compared with Nottingham Manufacturing Company's 9-10%. The hosiery division secured 13% of the British market, but this was less than half that of Pretty Polly at 28%. The report highlighted that if the company was to turn itself around action was required.