Underground Electric Railways Company of London
The Underground Electric Railways Company of London, Limited, known operationally as the Underground for much of its existence, was established in 1902. It was the holding company for the three deep-level "tube" underground railway lines opened in London during 1906 and 1907: the Baker Street and Waterloo Railway, the Charing Cross, Euston and Hampstead Railway and the Great Northern, Piccadilly and Brompton Railway. It was also the parent company from 1902 of the District Railway, which it electrified between 1903 and 1905. The UERL is a precursor of today's London Underground; its three tube lines form the central sections of today's Bakerloo, Northern and Piccadilly lines.
The UERL struggled financially in the first years after the opening of its lines and narrowly avoided bankruptcy in 1908 by restructuring its debt. A policy of expansion by acquisition was followed before World War I, so the company operated most of the underground railway lines in and around London. It also controlled large bus and tram fleets, the profits from which subsidised the financially weaker railways. After the war, railway extensions took the UERL's services out into suburban areas to stimulate additional passenger numbers so that, by the early 1930s, the company's lines stretched beyond the County of London and served destinations in Middlesex, Essex, Hertfordshire and Surrey.
In the 1920s, competition from small unregulated bus operators reduced the profitability of the road transport operations, leading the UERL's directors to seek government regulation. This led to the establishment of the London Passenger Transport Board in 1933, which absorbed the UERL and all of the independent and municipally operated railway, bus, and tram services in the London area.
Establishment
Background
The first deep-level tube railway, the City and South London Railway, opened in 1890. Its early success resulted in a rush of proposals to Parliament for other deep-level routes under the capital, but by 1901 only two more lines had opened: the Waterloo & City Railway in 1898 and the Central London Railway in 1900. Construction started on one other line and stopped following a financial crisis. The rest of the companies needed help to raise funding.The District Railway was a sub-surface underground railway, which had opened in 1868. Its steam-hauled services operated around the Inner Circle and on branches to Hounslow, Wimbledon, Richmond, Ealing, Whitechapel and New Cross. By 1901, the DR was struggling to compete with emerging motor bus and electric tram companies and the CLR, which were eroding its passenger traffic. To become more competitive, the DR was contemplating a programme of electrification. However, it needed to be financially strong enough to raise the capital to carry out the work independently. It also had parliamentary approval for a congestion-relieving deep-level line that was to run beneath its existing route between Gloucester Road and Mansion House.
By 1898, American financier Charles Tyson Yerkes had made a large fortune developing the electric tramway and elevated railway systems in Chicago, but his questionable business methods, which included bribery and blackmail, had finally drawn the disapproving attention of the public. Yerkes had unsuccessfully attempted to bribe the city council and Illinois state legislature into granting him a 100-year franchise for the tramway system. Following a public backlash, he sold his Chicago investments and turned his attention to opportunities in London.
Acquisitions
Yerkes' first acquisition in London was the Charing Cross, Euston and Hampstead Railway. The company had parliamentary permission to build a deep-level tube railway from Charing Cross to Hampstead and Highgate. Still, it could not raise the finances, selling only a tiny fraction of the shares. Robert Perks, a solicitor for several railway companies and Member of Parliament for Louth, had suggested the CCE&HR to Yerkes and the American's consortium bought the company for £100,000 on 28 September 1900.Perks was also a large shareholder in Yerkes' next target, the Metropolitan District Railway, usually known as the District Railway or DR. By March 1901, the syndicate had acquired a controlling interest in the DR and proposed its electrification. Yerkes established the Metropolitan District Electric Traction Company on 15 July 1901 with himself as managing director. The company raised £1 million to carry out the electrification works including the construction of the generating station and supplying the new electric rolling stock. In September 1901, Perks became the DR's chairman.
The Brompton and Piccadilly Circus Railway was a tube railway company that had been purchased by the DR in 1898 but had remained a separate financial entity. It had permission to construct a line from South Kensington to Piccadilly Circus. Still, it had yet to raise the capital to do so. At South Kensington, it was to connect to the deep-level line planned by the DR. On 12 September 1901, the DR-controlled board of the B&PCR sold the company to the MDETC. In the same month, the B&PCR took over the Great Northern and Strand Railway, a tube railway with permission to build a line from Strand to Finsbury Park. The routes of the B&PCR and GN&SR were subsequently linked and combined with part of the DR's tube route to create the Great Northern, Piccadilly and Brompton Railway.
Yerkes' final purchase was the Baker Street and Waterloo Railway in March 1902 for £360,000. The BS&WR had permission to construct a line from Paddington to Elephant & Castle and, unlike his other tube railway purchases, construction work had started in 1898. Substantial progress had been made before it was stopped following the collapse of the BS&WR's parent company, the London & Globe Finance Corporation, due to the fraud of its managing director Whitaker Wright in 1900. With a varied collection of companies under his control, Yerkes established the UERL in April 1902 to take control of them all and manage the planned works and took the position of chairman. On 8 June 1902, the UERL took over the MDETC and paid off the company's shareholders with cash and UERL shares.
Finances
The UERL was set up with an initial capitalisation of £5 million. The company was backed by three merchant banks, Speyer Brothers in London, Speyer & Co. in New York and Old Colony Trust Company in Boston, each of which was to receive £250,000 from the capital raised. Almost 60 per cent of the initial share offering was bought in the United States, with a third sold in Britain and the rest mainly in the Netherlands. Further capital was soon needed for the construction works and additional share and bond issues followed. The UERL eventually raised a total of £18 million.Like many of Yerkes' schemes in the United States, the structure of the UERL's finances was highly complex and involved the use of novel financial instruments. One method, used by Yerkes to raise £7 million, was "profit-sharing secured notes", a form of bond which was secured against the value of shares. They were sold at a 4 per cent discount, paid 5 per cent interest and were due for repayment in 1908. The assumption was that shares would inevitably rise in value once the UERL's tube railways were operational and producing a profit. Investors in the notes would gain the double benefit of the growth in share price and interest.
Engineering works
Electrification of the District Railway
Before its takeover, the DR had carried out some joint electrification experiments with the Metropolitan Railway, the other sub-surface line with which the DR shared the Inner Circle. A section of track between Earl's Court and High Street Kensington was electrified with a four-rail system and a jointly owned test train operated a shuttle service between February and November 1900. Having proven the practicality of electric traction, the two companies set up a joint committee to select a supplier of equipment for the electrification of their networks.The committee's preferred system was a 3,000 volt, three-phase alternating current system proposed by Hungarian electrical engineering company Ganz. The system delivered current by overhead conductor wires and was cheaper than alternatives using power rails and required fewer electrical sub-stations. An experimental line had been constructed by Ganz in Budapest, although the system had not yet been adopted for the full-scale operation of a railway. Before the appointment of Ganz could be finalised, Yerkes took control of the DR. He and his engineers preferred the low voltage direct current conductor rail system they had worked with in the United States and which was already in use on the City & South London and Central London Railways; they rejected the Ganz system putting the DR and the MDETC into dispute with the MR which wanted to proceed with the Ganz system. After some acrimonious debate between the two companies, some of which was carried out in public through the letters pages of The Times newspaper, the dispute went to arbitration at the Board of Trade. The decision was made in December 1901 to use the four-rail system, although the arbitrator, Alfred Lyttelton, was critical of the DR's unilateral decision.
Victorious, the MDETC quickly began the electrification of the DR's tracks, starting with an extension from Ealing Common to South Harrow that opened with its first electric service in June 1903. Conversion of the rest of the DR's tracks was completed in mid-1905, although failure to coordinate installations with the MR meant that the first electric services on the Inner Circle from 1 July 1905 were disrupted for several months due to equipment failures on the MR's trains. Power came from the UERL's own Lots Road Power Station on Chelsea Creek. Originally planned by the B&PCR, construction of the power station began in 1902 and finished in December 1904. It became operational on 1 February 1905, generating three-phase alternating current at 11,000 volts, which was converted to 550 volts direct current at track-side transformers located around the network. The power station was constructed large enough to power all of the UERL's lines once they opened plus others later. By the time the last of the DR's steam trains were retired on 5 November 1905, the UERL had spent £1.7 million on the electrification of the line.