The Government announcement respecting the discounting of bills was made on August 13, and a very large business was transacted, but the Chancellor of the Exchequer was able to announce later that of 120,000,000l. which was sent to the Bank of England less than half was likely to remain in "cold storage" at the end of the year. The case of merchants who had money owing to them abroad, all of which during the war would obviously not be paid, was hard, and, in order to avoid disaster, the Government announced a scheme early in November, providing that in approved cases advances not exceeding 50 per cent. of the amounts outstanding should be made to them by means of six months' bills; 75 per cent. of any loss was to be borne by the State and 25 per cent. by the Banks.
On December 4 the Moratorium came to an end.
At the end of the year the stock of gold shown in the Bank return showed a large increase at nearly 70,000,000l. (exclusive of 18,500,000l. earmarked for the Currency Note Reserve), as compared with 35,000,000l. at the end of 1913. A large proportion of the stock at the end of the year represented gold held in financial centres of Britain beyond the seas on account of the Bank, until arrangements could be made to ship it to this country.
A notable development during the peaceful period of the year was a further series of banking amalgamations, including a fusion between the famous houses of Messrs. Coutts & Co. and Messrs. Robarts, Lubbock & Co.
Immediately after the outbreak of war Parliament voted a credit of 100,000,000l. and between August and November 90,000,000l. in bills were issued. These were mostly in six months' bills, and were placed at average rates ranging from 2l. 18s. 6d. to 3l. 15s. 6d. In November the issue of the great War Loan for 350,000,000l. was successfully made, the issue taking the form of stock at 95 per cent., redeemable in 1925-8, and bearing interest at 3½ per cent. The net yield was 323,000,000l., which sum was intended to include the repayment of the Treasury Bills issued. A notable feature of the terms of the War Loan was that the Bank of England undertook to make advances up to the amount of the issue price at 1 per cent. below the current Bank rate.
Early in January, the Stock Exchange indulged in a little "boom," but towards the end of February a reaction set in and from then until the outbreak of war markets were extremely dull. The Ulster crisis, severe depression in South America, and the failure of the Canadian Agency and the firm of Chaplin, Milne, Grenfell & Co. were depressing influences. Throughout July markets were under the cloud of foreign political complications, and on July 24 the Austrian Note to Serbia caused serious alarm and an immense number of selling orders. In the end of July the settlement was completed with no more serious consequences than the failure of nine firms, involving twenty members. On July 31 the Committee, in response to many representations, decided to close the House. Minimum prices for Trustee stocks were fixed by the Committee on September 14, based on the quotations current on July 30, the main object being to prevent undue depression. Arrangements were made in consultation with the Treasury for carrying out the mid-August settlement on November 18, special rules being issued. The Banks, in return for the assistance they had received from Government, undertook to continue loans during the war without extra margin, while other lenders were granted advances up to 60 per cent. from the Bank of England.
Consols, which were quoted at 71-5/8 at the end of 1913, were actually higher on July 27 at 72¼ and at the end of 1914 stood at 68½, this, however, being the Stock Exchange minimum price, and nearly all representative securities showed substantial falls.
On December 23 the announcement was made that the Stock Exchange would reopen on January 4, with stringent provisions designed to prevent sales by the enemy.
One notable development following the outbreak of war was the breakdown of the foreign Exchanges. This meant that while it lasted oversea commerce was paralysed. In New York, owing to the large sales of American securities in Europe, sterling exchange rose at first to the extraordinarily high level of $6, and Sir George Paish was deputed to proceed to the United States to discuss measures to relieve the situation. Cargoes of grain and other produce were not bought, and consequently there was almost a complete cessation of chartering. Gradually the position was righted, and early in September business was being done in a quiet way. From then freights, which had been abnormally low during the summer, began to rise and continued to do so.
The rise was, in the main, due to a lack of tonnage in certain routes. The short supply was caused by the acquisition of many hundreds of vessels by the Government for various purposes; the inability of the German mercantile marine to take any share in the world's carrying trade; and the loss of a certain number of British ships sunk by the enemy's vessels or through striking mines. Towards the end of the year the position was very seriously aggravated by congestion at British and continental ports. The enlistment of large numbers of skilled dock labourers in the Army, the reservation of certain ports and docks for military requirements, and the accommodation necessary for the Government's large purchases of sugar, all combined to make the position difficult. Ships were kept for long periods waiting their turn to discharge, and it was not uncommon for vessels to be in port three or four times as long as usual. These delays undoubtedly detracted somewhat from the extraordinarily high rates which were being secured. The most striking rate was perhaps that of the carriage of grain from Argentina. As compared with a rate of 12s. 6d. per ton quoted just before the war, 50s. was paid by the end of the year, and this figure was far short of the prices that have since been paid. The rate for coal from Newcastle to London which had been as low as 2s. 6d. rose to about 13s. 6d. As some relief for the situation, the Admiralty made arrangements to put a considerable number of enemy steamers which had been detained in this country at the outbreak of war into the coal trade. These vessels, as soon as crews could be found for them, were placed on the market, and did not have any effect in reducing the high rates. A few enemy steamers which had been captured at sea by British warships were sold by auction as prizes. Sums which were considered abnormally high were bid for them, but it is reasoned that while freights continue on the level current at the beginning of this year they should prove satisfactory acquisitions to their owners.