Current Scholarship
Why Lancashire? Banking As the Spark That Set Off Industrialization

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Author: Carolyn Sissoko, University of the West of England

Following works such as Hudson (1989), Walton (1989) and Hudson (2014) this paper focuses on British industrialization as a regional phenomenon and asks Why Lancashire? The paper argues that a change in the Bank of England’s commercial discount policy at the end of the Seven Years’ War promoted the growth of banking. Apparently due to the British government’s success in driving down the interest rates and other terms on the public debt, the Bank deliberately expanded its private sector lending at the end of the Seven Years War by, for example, relaxing the rules for the discount of promissory notes. This paper argues that these policy changes primed the British economy for the growth of banking.

Relying on theoretic frameworks developed in Sissoko (2007), Sissoko (2019) and Sissoko (2021), the paper argues that banking plays a fundamental role in making markets work – and more particularly in making it possible for prices to accurately reflect marginal cost and marginal benefit instead of being determined by financing constraints. Thus, the paper argues that the growth of English banking – particularly in the Lancashire region – led to a reduction in financial constraints on economic activity. Then the dramatic growth that was experienced in Lancashire and nearby counties can be explained by the growth of banking.

The paper weighs a variety of explanations for the growth of banking in the Lancashire area specifically. These explanations include: proximity to Liverpool, which was the most important port serving the slave trade and the Atlantic economy more generally; distance from London, which may have allowed banking to develop in its early years without being perceived as a threat to existing London financial interests; and more traditional explanations for the fact that Lancashire and its environs led industrialization in England, such as resource endowments, demographic changes, and the wave of technological innovation.

Carolyn Sissoko, “Why Lancashire? Banking As the Spark That Set Off Industrialization,”(February 25, 2022). Available at SSRN: or