New Factory

A week after completing the purchase of the second piece of land in 1920, Messenger’s received a letter from Messrs Wilshere, Gimson & Co., chartered accountants, of Winchester House, No. 1, Welford Road, Leicester, regarding the building of a new factory on the recently acquired land[1]. The letter started by stating the formal agreement between Messenger & Co., Ltd. and Frederick Grogan. The initial agreement entered in was, as described above, was an arrangement to “work certain patents taken out” for the manufacture of Electric Stoves as a separate Department of the business under the title of ‘The Arora Company’. Later, another agreement was made setting legal form the contract which was to between the two parties.

 

1962 OS Map

Because of the success of the new venture, in order to meet demand, a large capital outlay would be required to both build the new factory and furnish with the appropriate plant. It was estimated that £12,000 capital was required and Messenger’s did not have the necessary finances, without either increasing their own capital or finding the additional money required to for the new Company.

Thus, the Directors of Messenger & Co., Ltd. consulted Messrs Wilshere, Gimson & Co., with regarding to the timing of forming a separate Company. Another problem lay in the fact that, at the time, the Arora Company was making a significant profit compared with Messenger’s. The agreement between Messenger’s and Frederick Grogan allowed 40% of the profits made by the Arora Company to be paid to Frederick Grogan. This figure could in turn be allowed as a legitimate deduction for a tax known as the Excess Profit Duty (EPD)[2], which was introduced in 1915 budget, aimed at wartime profiteers. EPD had be not removed at the end of the war and mainly because of the arrangement with Grogan, Messenger’s had not actually paid any EPD. Obviously, there was concern that if the new Company was formed, it would almost certainly end the offset arrangement. If they were to go ahead under the current tax arrangements, it was likely that Frederick Grogan would only receive his salary of £450 per year and the profits would go to the government. Indeed, Frederick Grogan was only willing to proceed in setting up the new Company and becoming Managing Director, on the undertaking that that his financial interests would not be comprised. However, if this were not the case, he insisted on waiting until the government had removed the Excess Profits Duty[3].

 

The Arora Factory – The Electrician, 24 September 1920

The advice from Messrs Wilshere, Gimson & Co., was that they could not see a way of both forming a subsidiary Company and continuing the process treating the two as one for the purpose of EPD. They suggested waiting until the next budget was announced to understand whether the Government were planning on removing the tax[4]. However, in the budget of June 1920, the Chancellor, Austen Chamberlain, raised the EPD to 60 per cent, whilst at the same time introducing a corporation tax of five per cent on limited liability companies. The government regarded these as short-term actions to address the post-war economic crisis[5].

Aerial Photograph taken 15 July 1952 – see Britain form the Air website for details

The three Arora single storey factory buildings are located towards the top of the aerial photo just right of centre; A small portion of Messenger & Co., Ltd.’s factory is shown in the top left hand corner of the photograph.

Alfred Burder, who at the time was Deputy Chairman, was also against building the new factory, until the new Company was formed. He was concerned that if the buildings were erected under the current arrangements and Frederick Grogan, the main patentee should leave, or the business run into trouble, then Messenger & Co., Ltd., as the parent Company would be liable[6].

It is not clear how the problem was resolved but building work started soon afterwards. By the third week of September 1920 the new factory was almost complete[7] and the firm expected to have completed the move from their temporary factory by the middle of October. The new buildings, very reminiscent of Messenger’s own factory consisted of three main brick-built single-storey bays each of 40ft. span, giving a total width of 120ft. Each bay was 85ft. long and designed such that, if required, further extensions could be made.

Aerial Photograph taken 15 July 1952 – see Britain form the Air website for details

The Arora factory is located towards the bottom left hand corner of the above photograph; the Rosebery Street School air raid shelters can be seen just above the factory. 

 

Goods Yard Close, Loughborough, site of Arora Factory

 

References:

  1. Leicestershire, Leicester and Rutland Record Office ref: DE2121/291.
  2. Whilst introduced specifically as a wartime measure it proved very lucrative. In 1916 the rate was raised to 60 and in 1918 to 80 per cent. The EPD was abolished with the 1920 tax reform.
  3. Leicestershire, Leicester and Rutland Record Office ref: DE2121/291.
  4. Ibid.
  5. The Cabinet Papers, 1915-1982 – End of the First World War
  6. Leicestershire, Leicester and Rutland Record Office ref: DE2121/291.
  7. The Electrician, 24th September, 1920.