The Economic History Review

How good was the profitability of British railways, 1870–1912?

Volume 64 Issue 3
Home > The Economic History Review > How good was the profitability of British railways, 1870–1912?
Pages: 798-831Authors: BRIAN MITCHELL, DAVID CHAMBERS, NICK CRAFTS
Published online: October 15, 2010DOI: 10.1111/j.1468-0289.2010.00550.x

Log in to access the full article.

This article provides new estimates of the return on capital employed (ROCE) for major British railway companies. It shows that ROCE was generally below the cost of capital after the mid-1870s and fell until the turn of the century. Addressing cost inefficiency issues could have restored ROCE to an adequate level in the late 1890s but not in 1910. Declines in ROCE hit share prices and investors made little or no money in real terms after 1897. Optimal portfolio analysis shows that, while railway securities were attractive to investors before this date, they would have been justified in rushing to the exits thereafter.

SHAPE
Menu