The earliest canal building was undertaken as a local enterprise, usually by a merchants, manufacturers or mine owners needing to ship goods, such as the Duke of Bridgewater's canal built to ship coal from Worsley to Manchester.
Despite the high cost of construction, the price of coal in Manchester fell by 50% shortly after it opened, and the financial success was attractive to investors.
The American War of Independence ended in 1783. A long run of good harvests resulted in an increase in disposable income and an increase in the number of people looking to invest capital for profit with little personal interest in the business. This resulted in an increase in less cautious speculation.
There was a dramatic rise in the number of schemes promoted. The number of canals authorised by Act of Parliament in 1790 was one, but by 1793 it was twenty. The capital authorised in 1790 was £90,000 (£9.38 million in 2015), but this had risen to £2,824,700 (£289 million in 2015) by 1793.
Some of the canals authorised during this period went on to be financially profitable. However there were a number, including the Herefordshire and Gloucestershire Canal, which never paid a dividend. Others, such as the Grand Western Canal, were never completed.
- British Canals. The Standard History. Joseph Boughey and Charles Hadfield. ISBN 9780752446677
- UK CPI inflation numbers based on data available from Gregory Clark (2014), "What Were the British Earnings and Prices Then? (New Series)" MeasuringWorth.