English cotton manufacturing in 1861 held a position of importance equalled by no other one industry.  Estimates based on varying statistics diverge as to exact proportions, but all agree in emphasizing the pre-eminent place of Lancashire in determining the general prosperity of the nation.  Surveying the English, not the whole British, situation it is estimated that there were 2,650 factories of which 2,195 were in Lancashire and two adjacent counties.  These employed 500,000 operatives and consumed a thousand million pounds of cotton each year[667].  An editorial in the Times, September 19, 1861, stated that one-fifth of the entire English population was held to be dependent, either directly or indirectly, on the prosperity of the cotton districts[668], and therefore also dependent on the source of supply, the Confederate South, since statistics, though varying, showed that the raw cotton supplied from America constituted anywhere from 78 to 84 per cent. of the total English importation[669].

The American crop of 1860 was the largest on record, nearly 4,000,000 bales, and the foreign shipments, without question hurried because of the storm-cloud rising at home, had been practically completed by April, 1861.  Of the 3,500,000 bales sent abroad, Liverpool, as usual, received the larger portion[670].  There was, then, no immediate shortage of supply when war came in America, rather an unusual accumulation of raw stocks, even permitting some reshipment to the Northern manufacturing centres of America where the scarcity then brought high prices.  In addition, from December, 1860, to at least April, 1861, there had been somewhat of a slump in demand for raw cotton by British manufacturers due to an over-production of goods in the two previous years.  There had been a temporary depression in 1856-57 caused by a general financial crisis, but early in 1858 restored confidence and a tremendous demand from the Far East—­India especially—­set the mills running again on full time, while many new mills were brought into operation.  But by May, 1860, the mills had caught up with the heavy demands and the rest of the year saw uncertainty of operations and brought expressions of fear that the “plunge” to produce had been overdone.  Manufactured stocks began to accumulate, and money was not easy since 1860 brought also a combination of events—­deficient grain harvest at home, withdrawal of gold from England to France for investment in French public works, demand of America for gold in place of goods, due to political uncertainties there—­which rapidly raised the discount rate from two and one half per cent. in January, 1860, to six in December.  By the end of April, 1861, the Board of Trade Returns indicated that the cotton trade was in a dangerous situation, with large imports of raw cotton and decreased exports of goods[671].  The news of war actually begun in America came as a temporary relief to the English cotton trade and in the prospect of decreased supply prices rose, saving many manufacturers from impending difficulties.  A few mills had already begun to work on part-time because of trade depression.  The immediate effect of Lincoln’s blockade proclamation was to check this movement, but by October it had again begun and this time because of the rapid increase in the price of raw cotton as compared with the slower advance of the price of goods[672].