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State control of the economy ensured that increases in production demand were met efficiently. It was also necessary to control the inflationary pressures that accompanied the war to maintain a stable society. Government intervention was evident in the planning, direct control of industry, allocation of resources, subsidy and rationing.
The government already controlled the Royal Ordinance Factories, which produced munitions and, early in the war, it assumed control of railways and ports. The Ministry of War Transport took over long-distance road haulage, but in general, production remained in private hands. Government used the allocation of resources through the Limitation of Supply Orders to direct industry. In some industries, 'nucleus' firms absorbed others, reducing the production of nonessential goods and shrinking the civilian sector. This was matched by a massive expansion of the war sector based on the production of munitions.
Aircraft building was prioritised when the country was threatened by invasion in 1940. Later, it was realised that prioritisation was detrimental to overall development and policy switched to the allocation of resources. A quota of resources, in terms of equipment, raw materials and manpower, was allocated to particular industries and departments. A Cabinet committee, the Production Executive, became the main decision-maker on planning. In February 1942, the Ministry of Production was established to assist with coordination.
The demands of war necessitated major shifts in emphasis and capacity. European sources of imported high-grade iron and steel, for example, were lost early in the war. This meant that capacity to deal with locally produced ore had to be built up, as did overall capacity. The iron and steel industry was a success during the war, emerging with greatly expanded capacity.
Before the war, Britain had been heavily dependent on food imports. This reliance was then reduced through an increase in agricultural production. When the emphasis switched from animal husbandry to arable farming, the government's ploughing-up campaign increased the area of land under cultivation by around 50 per cent. The transformation of agriculture was directed by giving subsidies to farmers as rewards for certain types of production. Agriculture emerged from the war greatly strengthened.
Coal mining was less successful in meeting the demands of war. Production in coal mining declined as workers moved into the armed forces and, by 1942, Britain was experiencing a serious shortage of fuel. In June 1942, a new Ministry of Fuel and Power took control of the industry's administration with the aim of raising output. The Greene Committee increased wages in the industry in 1942, but poor industrial relations and industrial disputes continued to characterise the industry, and there were a number of coal strikes during the latter years of the war.
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