The end of the First World War brought a post-war boom and an expansion of the shipping industry. Shipping lines tried to take advantage of the surge in demand, ordering more ships in an attempt to win the increased business. However, the boom was short-lived, and soon there was a severe slump in the industry from over-supply. The over-supply was also blamed on the emergence of serious overseas competition, particularly American and Scandinavian, to British shipping lines.
The suffering British exporting industries, such as coal, steel and manufactured products, had a big effect on the shipping industry, as there were fewer goods to be transported overseas. Coal exports (for use by steamships alone) fell from 21 million tons in 1913, to under 11 million tons in 1921. The problem was not just confined to the tramp shipping trade but also affected the liner trade. The British government did not offer subsidies or support to British shipping lines in the same way that foreign governments supported their lines.
World trade improved in the late 1920s, but was soon shattered by the Wall Street Crash and subsequent economic depression. This devastated British shipping, which passed on its difficulties to industries that relied on buoyant shipping companies (such as steel, shipbuilding, heavy engineering and coal). The devaluation of sterling ensured British shipping was slightly more competitive than its overseas competition, but the lack of business was too great for this advantage to overcome.
In an effort to prevail over the stagnation of the shipping businesses and its dependent industries, Britain introduced the British Shipping Assistance Act. This act allowed the government to lend money to tramp shipping lines in order to scrap their old ships and build modern replacements in British shipyards. Unfortunately, many of the ships replaced under the act were brought from overseas to be scrapped by the scheme, rather than to replace the existing British Merchant fleet.