Strategic inertia, financial fragility and organisational failure: The case of the Birkbeck Bank, 1870-1911

This article looks at the key factors behind the failure of the Birkbeck Bank in 1911. Using a wide range of primary source material, it charts how the Bank emerged from its philanthropic roots as a mutual building society in the 1870s to go on and enjoy spectacular growth during the late nineteenth century before eventually faltering and failing in the early twentieth century. Throughout the analysis, particular attention is given to the investment decisions taken by the Bank's management and the impact that these had on the Bank's fortunes. In addition, the article also looks at the extent to which the Birkbeck Bank's overall business model differed from those of other banks in this period. Ultimately, what it shows is that the Bank's failure to modify its investment strategy quickly enough in response to changing market conditions - most notably the fall in the value of Consols and other gilt-edged securities - proved to be the decisive factor in its eventual collapse. For this reason, the article contends, it is appropriate to categorise the 1911 Birkbeck Bank failure as one caused by strategic inertia rather than excessive risk-taking.