Opinion : 1968 – Political influences

Lord Stokes

It’s time to discuss the political influences on the BMC-Leyland merger of 1968, some 55 years ago this week. Harold Wilson’s Labour Party was four years into government and had experienced some of the great ups and downs of power.

The Labour Government had won the General Election on 15 October 1964, but only had a House of Commons majority of four. Moreover, as the new Government inherited a deficit of £800 million, the value of Sterling came under pressure on the Foreign Exchange Markets. Wilson (above) was determined to resist a devaluation of Sterling – to him Sterling was a symbol of national status, of Britain’s role in the world as a key player.

Hampered by such a narrow majority, Wilson called a snap General Election on 31 March 1966 and led the Labour Party to a 98-seat victory. The incoming Labour Government therefore had a clear mandate from the British public for the re-nationalisation of major industries including the steel industry – 14 of the largest companies were thus re-nationalised in 1967 and the British Steel Corporation was created. However, due to several factors including international crises and dock strikes, by November 1967 the financial pressures had become overwhelming. On 16 November 1967 the Chancellor of the Exchequer, James Callaghan, with Wilson’s backing, recommended to the Cabinet that Sterling should be devalued by just under 15 per cent. This was agreed and then implemented, at 14 per cent, on 18 November 1967. A package of measures including defence cuts, restrictions on hire purchase (credit) and higher interest rates was also agreed.

Wilson was greatly influenced by the economic development of the Soviet Union in the middle decades of the twentieth century under its left wing, indeed Communist, Government. It seems unlikely now, but at that time the world was unaware of the murderous aspects of Stalin’s regime, and saw instead a state that had developed from an agricultural peasant economy in the 1920s to being a nuclear superpower by the 1960s.

Stalin had operated a planned economy – which required state control of all industries and the rigorous setting and commitment to economic targets established in Five-Year Plans. Wilson had visited the Soviet Union frequently since the late 1940s, and had formed a close relationship with Molotov, a leading figure in Stalin’s oligarchy.

Was Communism an influence?

Wilson was not a Communist himself, of course, and was never going to restrict personal freedom or nationalise everything in sight, but he did see the advantages of state intervention in the economy.

He believed that this, together with forward planning by the state of the industrial sector, could bring similar economic advancements to those of the Soviets. His pre-Election ‘White Heat of Technology’ speech in 1963 attested to this view. Once in power, Wilson set up the Industrial Reorganisation Commission (IRC) to help bring this about.

Government Departments at the time included the Department of Economic Affairs, (which was charged with planning the economy) and a Ministry of Technology (which was charged with putting money into technologically advancing industries). In 1968, the Secretary of State of State for Technology was one Anthony Wedgewood-Benn, MP.

Hammering together two automotive rivals

It was against this background, that the Government acted to influence the merger of BMC and Leyland.

Benn’s diary for 15 January 1968 states that: ‘British Motor Corporation and Leyland Motors had agreed very late last night to merge their two companies into one. This is a fantastic achievement, and it all began in my house in November 1966 when George Harriman and Donald Stokes came to discuss the future of Rootes, and I put it to them that they ought to consider merging’.

Clearly, Benn is overstating his own role on the merger here. We know that the two companies had been discussing a merger as early as 1964, when they began by looking at co-operating in export markets. Nonetheless, Benn did believe that he had made a difference. Wilson is known to have put pressure on Benn during this time ‘to get those two merged’, believing that by doing so Britain would have a motor industry to challenge the international giants.

The charm offensive

This view is backed up in Graham Turner’s 1971 book, ‘The Leyland Papers’. Turner describes a number of meetings in Whitehall between Ministers, Civil Servants, and leading figures within the two companies. These discussions culminated in a meeting at Chequers in October 1967, where Wilson, Benn, Harriman and Stokes spent a lengthy evening.

Harriman said afterwards: ‘…the whole essence of the evening was the Prime Minister using Chequers charm to further the merger’.

After Chequers, Stokes and Harriman both publicly committed themselves to the view that a merger would be good for the country. Harriman was quoted as saying ‘when the Prime Minister asks, it is not a good thing to say no’. By January 1968, Stokes was telling Wilson that the merger per se was looking difficult, and that he was contemplating making a bid for the company.

Merger, but at what price?

After the takeover, Turner tells us that: ‘As for Wilson, he felt sure that Leyland had paid too much’.

What do we make of all this? Maybe a merger or a takeover would have happened without political influence. Harriman was less enthusiastic than Stokes. Wilson believed that a larger company would be a more successful one. Neither Wilson nor Benn were industrialists and neither had experience of the motor industry.

Stokes was a salesman but not a production man. Did any of them know what they were getting into? With hindsight, the creation of such a large, diverse and inherently chaotic company looks like a recipe for disaster. Why did it not appear that way at the time?

Morris Marina

Jonathan Carling
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  1. You have to consider the politics as to how the world looked in the late 60s.

    I recall watching as part of my Economics A Level in the early 80s an Open University program which looked at the then economic failure that was occurring in Eastern Europe as they were squeezed between the Soviet Union charging “world price” for energy and debt repayments to the West. As part of this program it used a number excerpts from things Panorma and Money Program from the late 60s and early 70s. These were contrasting the stagnation that was going on in the UK, with the massive investments going on in the planned economies in Eastern Europe at the time, for example looking at the FSO car plant in Poland. The narrative was very much that “Anglo Saxon” capitalism and after the fuel crisis capitalism in general was broken whilst the planned economies were busy surging ahead. However this all fell apart when the Soviet Union facing its onw economic issues started charging the Warsaw Pact countries the market price for the oil etc they paid them and the failure of these big industrial projects in the late 60s and early 70s to even fund the debt repayments.

    Certainly if I was sitting here writing this twenty years ago, the idea that the Warsaw Pact countries model, was the model to follow, would seem laughable. However two decades later and looking down the barrel of failed privatisations and growing inequality, I feel the political centre of gravity is returning to one that demands Government intervention.

  2. Something that tends to be forgotten now is that – in the late 60s – it was widely believed the biggest threat to European car producers in the 70s would not be from Japan (as turned out to be the case) but from the USA as it was believed Ford, GM and Chrysler would better integrate their US and European operations and thus achieve tremendous and crushing scale. There was pressure for each of the European car-producing nations to respond to this threat by developing a giant “national champion” by whatever means.

  3. @ Chris Cowin, Ford and GM were major players in Britain and Germany, owning huge factories in both countries and producing hundreds of thousands of cars every year, and Chrysler had bought Rootes and Simca completely by 1967, giving them access to the British and French markets. It was likely another car company could fall to the Americans( I’d imagine one of them would have been interested in Leyland, who produced Triumph sports cars that sold well in America), so there was this feeling of wanting protect Europe from the Americans. Of course, Renault was off limits due to being nationalised, Fiat enjoyed a close relationship with the Italian government and a sale would be off limits, but others could be bought out or offered an alliance with the Americans. I’d imagine the Americans would be interested in companies like BMW, Leyland, Mercedes and Volvo, who sold cars that would be desirable to American buyers and were gaining a following in America.

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