The period of speculation was followed by the inevitable reaction, and in 1850 it was found necessary to pass an Act "to facilitate the abandonment of railways and the dissolution of railway companies." Of the 8592 miles of railway sanctioned in the three Sessions, 1845-7, no fewer than 1560 miles were (as shown by the Report of the Royal Commission on Railways, 1867), abandoned by the promoters under the authority of the Act; while a further 2000 miles of railway, requiring 40 millions of capital, are said by the Report of the 1853 Committee to have been abandoned without the consent of Parliament.
To the extent indicated by these abandonments the railway situation was certainly relieved. But the mania and the resultant panic had serious consequences in regard not alone to investors in the schemes that failed but also to the companies that survived.
Apart from projects designed to open up entirely new districts—many of them of a perfectly genuine and desirable character—there were others directly devised to compete with existing lines and capture some of the remunerative traffic these were then handling; and it was, as I have shown, quite in accordance with the accepted principle of State railway-policy that such competition should be encouraged, in preference to any "districting" of the country among particular companies or to the creation or co-ordination of an organised system of railways on the lines proposed by Mr Gladstone's Committee.
The existing companies, finding that the territory already "allotted" to them (as they considered) was being invaded, or was in danger of being invaded, felt themselves forced, for the purposes of self-defence, to enter on a number of protective schemes which might not, at the time, otherwise have been warranted. Clifford says on this point in his "History of Private Bill Legislation": "As the Government took no steps to prevent the promotion of competitive railways, tending to diminish the profits of existing companies, the latter sought to protect themselves as they best could, and justified their many unprofitable extensions and amalgamations as measures forced upon them by the leave-alone policy of the Government."
Confirmation of this statement will be found in a speech delivered on February 23, 1848, by Mr C. Russell, M.P., chairman of the Great Western Railway Company, at the sixth half-yearly meeting, at Paddington, of the South Wales Railway Company (of which he was also chairman), and reported in "The Times" of the following day. Referring to a pamphlet which had been issued attacking the policy of the Great Western Railway Company, Mr Russell said:—
"If their engagements were extensive, and he did not deny that they were so, they had been entered in only as a matter of necessity. They all arose out of the mania of 1845-46, and even in the pamphlet in question it had been admitted that the Great Western was not one of those companies which at that time had promoted any of the many schemes which were afloat. He, as far as he was concerned, had not only not promoted these projects, but had taken every means in his power to check them. In January, 1846, in his place in Parliament he had predicted the results if some steps were not at once adopted to put a curb upon reckless speculation; but most unfortunately for all parties that was not the view which was taken by the House of Commons. Mr Hudson and other gentlemen maintained that the course he recommended would be an unfair interference with private enterprise, and the consequence was that schemes involving altogether the sum of £125,000,000 passed through the Legislature in that year. The Great Western had remonstrated with the President and the Vice-President of the Board of Trade, and, left to their own resources, they had been compelled, in self-defence, to look after their own interests by getting hold of all the rival or contemplated rival schemes."
In some instances the existing companies guaranteed interest to the shareholders of branches and extensions which were feared as rivals. F. S. Williams, in "Our Iron Roads," says of such lines as these that while many of them were accepted as feeders they "proved for a time to be only suckers."
The effects of the mania on the finances of existing railway companies was further shown by the fact that, in order to pay their contractors, some of the companies were obliged during the crisis to raise money at from ten to thirty, and, in some instances it is said, even at fifty per cent discount. Then, also, the shares in ten leading companies suffered between 1845 and 1847 a depreciation in value estimated at £18,000,000. The following are typical examples of the falls experienced:—
| COMPANY. | SHARES. | JULY,1845. | APRIL 4,1848. | DECLINE. |
| £ | £ | £ | £ | |
| London and Birmingham | 100 | 243 | 126 | 117 |
| Great Western | 080(paid) | 205 | 088 | 117 |
| Midland | 100 | 187 | 095 | 092 |
| London and Brighton | 050 | 076 | 0028½ | 0047½ |
While the general situation in the railway world had been thus developing, there was a revival, in 1846, of the idea that the work of Private Bill Committees in respect to railway schemes should be supplemented by some other form of inquiry into their merits.