‘commercial revolution’. This preceded major industrialization by two centuries and encompassed great upsurges in overseas trade with many consequences, not least the expansion of Britain's fleet. Essentially an English phenomenon, later the Scots were also heavily engaged. Trade experienced three long periods of growth, separated by virtual stagnation. Between 1475 and 1550 existing markets for English broadcloths and other woollens grew rapidly, because the importing regions became more prosperous and had greater purchasing power. In the second period, 1630–89, two general circumstances aided expansion. South European markets, previously the domain of Spanish and Italian industry, were won by the English and the Dutch in competition with one another. The second general circumstance was the rise of virtually new trades because cheaper English re-exports of sugar, tobacco, and calicoes created fresh markets. The third period, 1730–60, was linked to the growth of American and West Indian populations, production, and purchasing power, but also continued the advance of re-exports.

In the first period English woollen cloth exports were the bulwark of overseas trade, the wool trade declining sharply in the decade after 1510. In a period of inflation the quantity of cloth exported more than doubled by 1550; London gained at the expense of provincial ports, as trade with Antwerp grew and was controlled by the Company of Merchant Venturers. Interruptions to the Antwerp trade caused by wars gradually brought this phase of growth to a halt, although English merchants trading with Hamburg accessed central European markets via the Elbe. Another change after 1580, the revival of some provincial ports, also resulted from the collapse of the Antwerp entrepôt trade.

The second expansion in the 17th cent. can be largely attributed to the growth of exports to southern Europe. Demand suddenly increased in Spain and was then supplemented from Portugal and Italy. The northern trade declined in relative importance, and by 1700 accounted for only half of English cloth exports compared with nine-tenths in the early 17th cent. Light cloths or ‘New Draperies’ were attractive to these markets and increasingly beat Dutch competition, as English labour costs provided a cardinal advantage to these manufactures. Trade with Iberia also reached the Spanish and Portuguese colonies and thus the market was enlarged. The English cloth industry responded rapidly to changes in fashion and produced a greater variety of light cloths and textile mixtures. A substantial trade in salted and dried cod from the Grand Banks of Newfoundland was an additional source of exports to catholic Europe.

Several new imports in the period 1500–1750 provided exceptional profit margins and an incentive to exploration and mercantile enterprise. In the 16th cent. the chief imports were luxuries, especially French wine, but in the following century Spain and Portugal became important suppliers. Apart from wine, most imports were manufactures, bought in the Netherlands but produced in many parts of Europe. The gradual growth of British industry reduced the dependence on foreign manufactures in the 17th cent. One exception was European linens until the Scots and the Irish, protected by the Navigation Laws and a rising tariff wall, learned to copy and outdo continental producers during the 18th cent. Trade with the Baltic, mainly conducted in the 16th and early 17th cents. via the Netherlands, became more direct, first because of the activities of the Eastland Company (1579) and secondly because its profitability encouraged interlopers. In years of bad harvests Baltic corn was a standby, but after 1650 new raw materials were much more important. Amounts of timber, potash, tar, pitch, flax, and hemp increased as the navy and merchant marine grew, and Swedish iron also became important after 1650. From the Mediterranean came not only more wine but also wool, oil, raisins, figs and oranges, Italian silks, and Levant goods, including raw silk, mohair, cotton, and dyestuffs.

Trade with countries beyond Europe, insignificant before the Civil War, grew rapidly by 1700 when America and Asia accounted for a third of England's imports, and re-exports for nearly a third of all exports. The discoveries that Virginia could grow tobacco plants imported from Trinidad and that Brazilian sugar cane would flourish in the West Indies were fundamental to the later development of the Atlantic economy and of the triangular trade with Africa. The East India Company (1600) began trading principally in pepper and then in cotton cloth; both tapped markets in Britain and Europe. Trade in slaves, sugar, coffee, tobacco, pepper, and oriental cottons underpinned the third great era of expansion in the 18th cent. before industrialization had proceeded far, America and the West Indies being much the most buoyant trading partners. Liverpool, Bristol, and Glasgow benefited most from these developments.

The Atlantic trade was controlled by merchant partnerships. If journeys were long or large capitals were required, the company form of organization was preferable. Once trade was established—even when companies claimed trading monopolies—the return to trading by partnerships was general. The Russia Company (1555), the Levant Company (1581), and the Royal Africa Company (1672) all succumbed to this pattern; only the Hudson's Bay Company (1670) retained control over its territory. The East India Company also survived and was much the most important in terms of trade and capital employed, but there were abortive attempts to displace it after 1698. In the 18th cent. it was markedly on the defensive, a highly profitable anachronism.

The ‘commercial revolution’ was important for its effects upon the British economy and the British state. It was buttressed by protective mercantilism, especially by the navigation laws; its result was the accumulation of capital from foreign trade and ultimately lower rates of interest than might have prevailed without this expansion. Foreign produce brought profits to distributors involved in inland trade. Merchant investment in land was probably more important than capital flows to industry, but the growth of London was exceptional in Europe. Pressure for domestic improvement was a major consequence of Britain's growing affluence, as her industries became increasingly attached to the international economy.

John Butt