Trading With the Enemy: British Business and the Law During the First World War

Abstract

At the onset of the First World War, the British government banned trade and instituted a naval blockade against the German empire, thus declaring limited economic warfare on the basis of “business as usual.” Soon allegations were swirling in Whitehall and in the press that certain businessmen were flouting the Trading With the Enemy laws, trading indirectly with Germany through neutral ports. Moreover, Unionist backbenchers in parliament complained that German companies were permitted under British law to operate in the United Kingdom, subject to restrictions on their profits. Because of potential harm to British economic interests and because important officials and ministers, particularly in the Board of Trade, remained sympathetic to prewar, laissez-faire attitudes, the government was reluctant in the early years of the war to apply a strict definition of the blockade against Germany. Accordingly, the courts moved tentatively against suspect businessmen; by 1916, however, the government was forced by public pressure, resulting from the growing intensity of total war and hatred of the enemy, to adopt severe measures against businesses operating in the United Kingdom with alleged German connections. The result was the radical Trading with the Enemy (Amendment) Act of January 1916 — the true end of business as usual — which authorized the Board of Trade to wind-up or confiscate British companies suspected of German affiliation. By the end of the war, 583 such companies, great and small, were wound-up, the majority under the Asquith coalition government. The 1916 law was driven by commercial envy, dating from the prewar period, as well as by the state of war that existed between Britain and Germany. British business’s experience with the blockade and the Trading with the Enemy laws in the midst of total war confirms the decline both of laissez-faire and of traditional international business customs and practices to an extent unforeseen in 1914.