The Subterranean Railway (22 page)

The first of the three lines on which construction got under way was the embryonic Bakerloo, known originally as the Baker Street & Waterloo Railway, which had obtained an Act of Parliament in 1893 to run between the two stations in its name. There had been several previous incarnations of this idea because of the inconvenient location of Waterloo, the London & South Western Railway’s London terminal which, as we saw in
Chapter 7
, had already stimulated the construction of London’s second deep tube line, the Waterloo & City. As far back as 1865, a scheme to connect Waterloo with Whitehall using pneumatic power, near Scotland Yard, had obtained Parliamentary sanction and even been partly built. The plan collapsed as a result of a financial crisis but would probably not have been technically feasible in any
case, given the problems encountered during construction of Brunel’s Thames tunnel. Another proposal, for a half-mile-long Charing Cross & Waterloo Electric Railway, was also sanctioned by Parliament. It was to have been a cut and cover railway, with a deep tube section under the Thames and a northern terminus near Trafalgar Square, but again lack of money, together with the untimely death of its electrical engineer, Sir William (Wilhelm) Siemens, in 1883, killed off the embryonic railway shortly after the start of construction.

The Baker Street & Waterloo was a much more ambitious scheme since it was scheduled to be three miles long with several intermediate stations including Oxford Circus and Piccadilly Circus, which would become major hubs of the tube network. The main purpose of the railway was to create a link between north and south which, given all the concentration on east–west lines, had been rather forgotten. But the promoters also sold their project on the basis that the line would allow business people in the West End to go to Lord’s Cricket Ground in time to see the last hour’s play without leaving the office early. The Bill also specified that the railway could be used for carrying mail and small parcels as well as passengers.

As usual, the developers failed to attract the necessary capital and the scheme remained dormant for a couple of years until a supposed white knight, the London & Globe Finance Corporation, came to the rescue in November 1897. The company was owned by Whitaker Wright, yet another of the disreputable businessmen with which the story of the Underground is so peppered. And like so many of them, Wright had both US and UK connections. He was an Englishman who had made his fortune in the USA by mine prospecting and returned to Britain to live in ‘mildly eccentric affluence’.
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He had created a small empire of diverse companies which were ‘characterized by the existence on their boards of various dignitaries of whom few, if any, took part in their activities’.
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He was passionate about all things subterranean: he built a huge estate at Lea Park in Surrey which included a vast lake and, beneath it, a smoking room reached by tunnels in the form of
an underground conservatory so that his guests could watch fish or swimmers disporting themselves overhead. Another tunnel led to a large room under the artificial lake where tea could be taken.
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Whether the Globe company ever had sufficient finance to complete the line is doubtful, but it became the main contractor as well as developer, and construction started in August 1898. The rather ingenious method used was to have the main worksite as a pontoon stretching far out into the Thames, from which shafts were sunk and spoil removed straight onto barges. The digging under the river had to be undertaken with the aid of compressed air to prevent water leaking in but occasionally some would escape, creating an enormous bubble that made a huge splash when it reached the surface. One such waterspout upset a boat involved in a race and the company had to pay damages to the owner. The Greathead shield method, which had now become standard, was used to dig out the two tunnels, but the line was expanding on paper almost as fast as underground through a succession of Acts of Parliament which granted extensions to Marylebone, then to Paddington, in the north and to Elephant & Castle in the south where the line could connect with a network of tramways.

Substantial work on the tunnels had been completed, at a cost of £650,000,
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when, after eighteen months, the Globe’s funds ran out. Wright’s little empire of intertwined companies sustained heavy losses and collapsed as a result of financial irregularities which forced several into insolvency. When the problems spilled over into the railway project Wright desperately tried to talk up the value of the shares in the Baker Street & Waterloo, and even started buying up stock in the company to create a buoyant market, but to no avail. At the end of 1900, the London & Globe was declared bankrupt and most of the work on the line ceased. Suddenly, Wright found himself being pursued both by creditors and the criminal authorities. He attempted to flee, first to Paris and then to the USA, where he was unceremoniously put
on a boat back to England. He was arrested on arrival and prosecuted for publishing false balance sheets and accounts. In January 1904 he was found guilty of defrauding investors to the tune of a staggering £5m and sentenced to seven years’ imprisonment. But the case was being heard in the Royal Courts of Justice, rather than the Old Bailey, and before he was taken to prison he was allowed to meet his advisers in a private room where he dropped dead, having swallowed a cyanide capsule. A revolver, clearly a back-up method of suicide, was found on his body.

Yerkes managed to acquire the moribund line cheaply early in 1902. He merged it with the rest of his burgeoning empire of underground railways to create the Underground Electric Railways Company of London Limited (UERL), which was to run much of London’s transport network until the creation of London Transport in 1933. The UERL gained control of the other two big tube projects: the Great Northern, Piccadilly & Brompton Railway, the central section of the future Piccadilly Line; and the Charing Cross, Euston & Hampstead Railway, which would become the Charing Cross branch of the Northern; as well as the District Line. That left only the Central, the City & South London and the Metropolitan outside UERL control and before the start of the First World War the first two of these would be incorporated into the empire created by Yerkes.

Having bought these virtual railways – in reality little more than planning permissions for putative lines without any source of finance – Yerkes set about raising the money to build them. He was astonishingly and rather inexplicably successful. He teamed up with the international family banking firm of Speyers, which had offices on both sides of the Atlantic – London, New York and Frankfurt – and was headed, in London, by Sir Edgar Speyer who agreed to help Yerkes raise £5m for the construction of the tube lines. The precise arrangements, which involved the same kind of complex financial engineering that Yerkes had used in the USA, were unfathomable even to Sir Harry Haward, the financial comptroller of the London
County Council, which kept a close eye on transport developments in the capital.
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Shares were sold in the USA, France, Germany and the Netherlands, as well as in the UK where, in general, people were sceptical about US financial methods which were generally thought to be dubious and, on occasion, corrupt. This was, indeed, a period in which large amounts of American capital were moving into Britain in a variety of industries as there were more opportunities for profitable investment than in the USA, but as one history puts it, ‘all this rustling of commercial paper was taken rather coolly in London’.
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Nevertheless, without US investors, the Tube network would have never been built. The London Stock Exchange had simply refused to invest in the various plans for tube lines which had been drawn up over the previous decade and, as we have seen, the Central only received funding thanks to US investors and the involvement of Establishment figures able to call on sources of ‘old money’.

There is little doubt that Yerkes and Speyer really believed that, as Yerkes put it, the enterprise of building tube lines under London ‘cannot but be profitable’.
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Speyer, indeed, claimed later that he only agreed to help raise the money after the most careful scrutiny. But he also profited personally from the deal. Two of the Speyer companies, together with Yerkes’s old bankers in Boston, the Old Colony Trust, were to receive £250,000 each on the formation of the UERL, 15 per cent of the capital raised, and a considerable burden on the future profitability of the enterprise.

Speyer’s scrutiny, however, must have included some great leaps of faith. Basically railways are fairly simple businesses, but predictions on both lines in the accounts are difficult to make. On the expenditure side, it was possible to devise a fairly robust assessment of the cost of tunnelling, but the bill for stations, which required the acquisition of potentially very expensive sites, was more difficult to calculate. On revenue, predicting numbers was – and indeed remains – a mug’s game. In the event, all the predictions for the new tube lines were massively optimistic and the investors never made any money. The
number of passengers travelling on these railways was dependent on many factors, notably the state of the economy and competition from other railways, trams and, increasingly, from the most modern form of transport, the motor bus, which Speyer and Yerkes could not easily have predicted.

The investors approached by Speyer and Yerkes seem to have been convinced that the potential returns in investing in the expanding London underground network were considerable. The Americans, principally from New York and Boston, bought nearly 60 per cent of the shares, with the British taking a third and the rest mainly being purchased by Dutch investors.

The £5m, though, was nothing like enough to fund the three new tube lines and the electrification of the District. A further sum of around £10m was needed and when an attempt to raise money for the Piccadilly was made in 1903, only 40 per cent of the shares were taken up. Here, Yerkes devised his master plan, an Edwardian version of junk bonds. The reasoning was that the tube lines were bound to make a profit and the price of the shares would go up. Therefore, he would raise money through what he called profit-sharing secured notes, a concept halfway between equity and debt. The notes, of which he sold £7m worth, would be redeemable for their value – which ranged between £100 and £1,000 in either dollars or pounds – in 1908 and would pay interest of 5 per cent. But they would also, crucially, go up in value with the shares on which they were secured, ensuring that the investors would see their capital value enhanced if the tube lines were as successful as predicted. The investors could, therefore, hedge their bets by getting a guaranteed rate of return as well as sharing in the profits. Amazingly, despite the scepticism over UERL’s share placings, this scheme, together with a successful rights issue to the original investors, brought in all the money Yerkes required. Needless to say, it was a decision that the investors would greatly regret. In total, with various other issues of debenture stock, Yerkes raised £18m to invest in London’s Underground.

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But was there a more cunning plan behind Yerkes’s thinking, related not to railways but to property? Did he really expect to earn a fortune through railways or were they a device to make money through increasing land values? Yerkes had always taken a great interest in the property served by his railways. There are several versions of the story of how Yerkes made field studies of the area around Hampstead and Golders Green. The best account describes how, in autumn 1900,

two men drove in a hansom cab over the lofty heights of Hampstead Heath high over London. From time to time, the driver drew in his reins, allowing the men to leave and walk over the open spaces. Barely a rooftop could be seen. Later they took the cab down to see the level fields north of the hill. The only feature here was an isolated crossroad, fringed by a couple of old houses and some farm buildings. They had reached the rural hamlet of Golders Green, not far from Hendon.
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One of the men was Yerkes and his companion, who is the source of this tale, was Harley Hugh Dalrymple Hay. Other accounts suggest that Yerkes actually sent an agent and only visited the site later, but whatever the precise details, Yerkes chose the bleak land over the hill from the Heath as the depot and terminus for his new railway, the Charing Cross, Euston & Hampstead line. Quite possibly, too, he invested considerably in the land, something he had done before in Chicago, to profit from the development. The principal historians of London’s transport postulate that Yerkes profited in this way, though their evidence is thin: ‘many eligible building sites had been acquired by an American-sounding concern calling itself the Finchley Road & Golders Green syndicate’.
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Certainly, if this is the case, Yerkes might have made a lot more money from these property interests than from the building of the line itself.

The Hampstead line, however, had to wait rather longer to be
revived than the Baker Street & Waterloo, where work soon restarted after Yerkes took over and had raised the money. Construction proceeded smoothly, apart from the odd glitch such as the Board of Trade requiring enhanced standards of access and safety which forced the company to rebuild Oxford Circus, ‘making it the only tube station to be substantially rebuilt before it even opened’.
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Various additional stations such as Regent’s Park and Lambeth North, allowed by the constant stream of new Acts which enhanced the scheme, also had to be accommodated at a late stage, but towards the end of 1905 empty trains were testing out the system. The Edwardians took as much trouble as their Victorian predecessors to ‘sell’ the new railway to the public. Just before the opening ceremony in March 1906, teams of journalists were given free rides along the line, lunched at the Great Central Hotel at Marylebone and left ‘happily clutching their [publicity] hand-outs’,
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probably not very different to those given to their successors when the Jubilee Line Extension opened in 2000.