Exhibitions Barings and the First World War

I do not see how it is possible to guard against such a general cataclysm as we have had, but it is none the less mortifying in the extreme to find how instantaneously the credit edifice which we have been building for generations could tumble to pieces in a night.

Observation of Gaspard Farrer, one of Barings' partners, 7 August 1914.

The First World War began on 28 July 1914 and Britain joined the conflict on 4 August. Within days it became apparent that the machinery of international credit was breaking down under the strain.

In the office there were upheavals, as young men went to war and women arrived to take on some of their tasks. John Baring, 2^nd Lord Revelstoke, Barings' senior partner, found that his financial knowledge was called upon by the British government.

Although some elements of Barings' work came to an abrupt halt, other areas - such as war-related work for the Russian government - became increasingly busy. Barings were also involved, at various times, in supporting the Dutch guilder and Russian rouble currency exchanges, which were struggling under the strain of the war.

The end of the war found Barings a changed firm needing to re-establish its role and business in a world that had also changed and was continuing to do so.

We fear banking troubles inevitable.

Barings by telegraph, 28 July 1914

Barings was by no means alone in being unprepared for the outbreak of war. To give the City time to adjust, the Bank Holiday of 3 August was extended by three days. Nonetheless Barings managed to open its doors on Tuesday 4 August.

In addition to the extended holiday, a moratorium was granted which permitted a one month renewal of all acceptances given prior to the declaration of war on 3 August. Effectively this meant that banks had a month to reorganise their affairs before needing to pay acceptances that they had guaranteed. Barings were fortunate in only needing to avail themselves of the moratorium for two days.

Barings had £5.35 million acceptances outstanding. However, when they reviewed their situation it became clear that a mixture of prudent management and luck meant that they were in a relatively good position. Only around £700,000 of the credits were at risk and German debts amounted to just £144,000. There was also something of a rush of funds into client accounts as part of the general flight of capital from continental Europe.

In early August Barings became members of the London Committee which was working with US bankers to arrange a shipment of gold for the relief of Americans in Europe. The money was used to provide immediate assistance and to enable people to reach ports so they could return to America.

Barings also undertook tasks for the British government before it had set up its own purchasing agencies. In December 1914, for instance, Barings instructed Kidder Peabody of Boston to contract for the purchase of 250,000 yards of cloth for jackets, 475,000 for trousers and 750,000 for overcoats from the American Woollen Company. Barings organised similar contracts for items such as telephone cable, gun cotton, picric acid and fishing boats.

Shrapnel and high explosive, Shells and hells for me.

Patrick Shaw Stewart

In total 56 staff saw service, of whom 10 were killed or reported missing. A further 11 were seriously wounded. Barings produced a War Service List at the end of the War. In addition a war memorial was installed at the firm's Bishopsgate office.

The three youngest partners in the firm all saw active service. Patrick Shaw-Stewart was the first of Barings' partners to go to war, enlisting in September 1914. Viscount Errington (Rowland Baring) also enlisted in 1914, rejoining the Grenadier Guards before entering the service of the royal household. Windham Baring initially stayed at Barings, clearing up some problems in Argentina. In mid-1915 he joined the Navy and subsequently spent the war in the Mediterranean and the North Sea.

Of the other staff on active service, the majority served in France, but others saw service in locations such as Palestine, Gallipoli, Salonica and the North Sea. Staff served in a number of regiments, with many in different parts of the artillery. Five members of staff served in the new Royal Air Force. Some individuals were recognised for their service with awards. P Babington, who ended the war a colonel in the RAF, was awarded the Distinguished Flying Cross and the Military Cross. Lionel Hall and Ernest Lyons were also awarded the Military Cross and Herbert Clarke the Military Medal.

Some staff were still in military service by the autumn of 1919. However, in November of that year the staff held a dinner to honour those who had returned from the war and to remember those who had been killed in action.

We are now reduced to a very elderly party, old crocks who ought by this time to have been on the shelf. - Gaspard Farrer, June 1915

The First World War had a huge impact even on those members of staff who, for whatever reason, did not actually see active service abroad. By mid-1915 more than half the male staff had gone and there were more women than men in the office.

Many of those who remained in London took on duties relating to the war. For instance, before joining the Navy in mid-1915 Windham Baring manned a search light on a high building every other night. Staff who received exemption from war service were encouraged to join volunteer corps such as the City of London National Guard.

While some aspects of the firm's work, such as the issuing business, were effectively put on hold during the war, other elements became increasingly busy, notably Barings' work for overseas governments. Barings had to apply for exemption from military service for key individuals and the criteria grew stricter as the war progressed.

On 14 March 1916 Barings wrote "The pressure of work has been largely increased owing to the fact that BB&Co Ltd are the London Bankers of the Russian, Italian and Portuguese Governments, whose accounts have assumed very large figures, in view of their military and other requirements, and necessitate constant attention. The payments on account of the Russian Government in particular have reached enormous proportions and command the undivided attention of the two principal clerks in the office and three others, two of whom are women clerks. The Clerk who is directly responsible for keeping the accounts of the Russian and Italian Governments is the one remaining unmarried member of the staff who is within military age. He is 36 years of age, and has no military training. He is at present performing very efficient duties on behalf of the Allies..."

Staff were also constrained at home by an increase in the cost of living. This was recognised by the partners, who introduced a cost of living allowance for staff. This amount received was dependent on salary. This allowance continued in the years immediately after the war.

Barings had a longstanding relationship with Russia. The first account of a Russian client was opened at Barings in 1775. As early as 1817 Barings joined with the Amsterdam bankers Hope & Co to market small batches of Imperial Russian Government bonds in both London and Amsterdam. In the 1850s the connection became closer still when Barings was appointed the government's financial agent in London. Barings then maintained the government's London bank accounts, collecting and making payments and undertaking a wide range of other routine banking functions.

With the outbreak of war in 1914, Barings' relationship with the Russian government grew significantly more important. The government now borrowed on an unprecedented scale and in particular from its allies, the governments of Britain and France. In Britain the funds were raised through the issue of Imperial Russian Government Sterling Treasury Bills discounted at the Bank of England.

During the war Barings managed a huge volume of transactions which the Russian government entered into with foreign suppliers for the purchase of items for the army. Hundreds of thousands of instructions were received for payments for supplies such as boots, barbed wire, ammunition and motor vehicles.

Other important business included Barings' appointment in 1916 to manage the rouble-sterling exchange, which was then collapsing under the strain of wartime conditions.

Barings' relationship with Russia ended abruptly with the 1917 Revolution and was not revived for sixty years

The end of the war came on 11 November 1918. Barings at the end of the war was led as much, if not more, by Revelstoke as it had been in 1914. Of the three youngest partners, only Windham Baring returned to Bishopsgate and he then died unexpectedly in 1922. Arthur Villiers rejoined Barings as a director in 1919, but the firm needed someone to take the house forward and Sir Edward Peacock became a director at the start of 1924.

Despite the impact on some areas of the firm’s business, profits had been held up – and in some years boosted – by the increase in what Gaspard Farrer called "certain banking business connected with allied countries". In particular the huge volume of work for the Russian government meant that, even though Barings' fees were generally reasonable, they made significant profits, notably in 1915 and 1916. 

The immediate post-war period saw something of an economic boom in Britain, with luxury goods available once more. However, prices were rising, and by the spring of 1920 the post-war boom was past its peak. 

The First World War inevitably led to changes in Barings' business. Sterling was a much weaker currency following the War, while the US dollar was much stronger. Some were pressing for a return to the gold standard, which happened in April 1925. This led to more freedom for banks to do business wherever they chose. However, it was set at the pre-war rate of $4.86 to the pound and this led to problems such as high interest rates and deflation.

After the War licences were required for foreign issues on the London market. In the 1920s priority was given to issues for reconstruction in Europe, leading to a geographical shift in Barings’ business. In the 1920s Barings frequently joined with Rothschilds and Schroders to form a powerful issuing syndicate. Countries created from the former Austro-Hungarian empire, for instance, were in desperate need of funds for reconstruction and modernisation. In contrast, the volume of issuing business for Argentina, Canada, the US and Russia reduced significantly. 

Meanwhile German reparations had been set at the Treaty of Versailles in 1919. They were reviewed regularly through the 1920s, for example in the Dawes Plan and the Young Plan. Barings' senior partner, Lord Revelstoke, was one of the British delegates to the conference which resulted in the Young Plan.