Financing the First World War required the Government to borrow the equivalent of a full year’s GDP, but its first effort to raise capital in the bond market was a failure.
The 1914 War Loan scheme raised less than a third of its £350million target and attracted only a very narrow set of investors.
This failure and its subsequent cover-up has only now come to light following an analysis of the Bank of England’s ledgers by researchers at Queen Mary University of London (QMUL).
A regional analysis of the ledgers found that nine per cent of the total number of investors were based in the North East of England. These statistics are based on a representative sample of 2,169 investors from all over Britain.
The researchers found 194 investors in the sample from the North East, who collectively contributed six per cent of the total capital raised by public loans to the Government.
Frank Buddle Atkinson, from Morpeth, descended from a family of colliery owners, was the region’s largest investor, putting in £50,000.
The research shows that the British Government’s initial efforts to pay for the First World War through loans from the public was a spectacular failure.
It reveals that the War Loan scheme failed to such an extent that the Bank of England had to secretly fund half the shortfall.
The Government raised just £91million from the public, less than a third of the £350million target, but led a propaganda effort to persuade the public that the scheme had been an overwhelming success.