page_title: Railway Mania
section_title: The end of the mania
hierarchical_section_title: Railway Mania / The end of the mania
context_page_description: Railway Mania was an instance of a stock market bubble in the United Kingdom of Great Britain and Ireland in the 1840s. It followed a common pattern: as the price of railway shares increased, speculators invested more money, which further increased the price of railway shares, until the share price collapsed. The mania reached its zenith in 1846, when 272 Acts of Parliament setting up new railway companies were passed, with the proposed routes totaling 9,500 miles. About a third of the railways authorised were never built—the companies either collapsed due to poor financial planning, were bought out by larger competitors before they could build their line, or turned out to be fraudulent enterprises to channel investors' money into other businesses.
context_section_description: As with other bubbles, the Railway Mania became a self-promoting cycle based purely on over-optimistic speculation. As the dozens of companies formed began to operate and the simple unviability of many of them became clear, investors began to realise that railways were not all as lucrative and as easy to build as they had been led to believe. Coupled to this, in late 1845 the Bank of England put up interest rates. As banks began to re-invest in bonds, the money began to flow out of railways, under-cutting the boom. 
  The share prices of railways slowed in their rise, then leveled out. As they began to fall, investment stopped virtually overnight, leaving numerous companies without funding and numerous investors with no prospect of any return on their investment. The larger railway companies such as the Great Western Railway and the nascent Midland began to buy up strategic failed lines to expand their network. These lines could be purchased at a fraction of their real value as given a choice between a below-value offer for their shares or the total loss of their investment, shareholders naturally chose the former. Many middle class families on modest incomes had sunk their entire savings into new companies during the mania, and they lost everything when the speculation collapsed.
  The boom-and-bust cycle of early-industrial Britain was still in effect, and the boom that had created the conditions for Railway Mania began to cool and then a decline set in. The number of new railway companies fell away to almost nothing in the late 1840s and early 1850s, with the only new lines constructed being by the large companies. Economic upturns in the 1850s and 1860s saw smaller booms in railway construction, but these never reached anywhere near the scale of the mania—partly due to more thoughtful (if still very limited) government control, partly due to more cautious investors and partly because the UK railway network was approaching maturity, with none of the 'blank canvas' available to numerous companies as in the 1840s.
caption: George Hudson
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