N M Rothschild in London, 1809-1836
The emergence of a London branch of the merchant house of Rothschild was a direct result of the rapid decline in British textile exports during the Continental Blockade. This slump took its toll on the business of commission agents like Nathan Rothschild, and obliged to develop other aspects of business, Nathan looked to London to extend the purely financial activities of his mercantile trade - discount and acceptance, for which he was gaining a considerable reputation. His marriage to Hannah Cohen, the daughter of one of London's wealthiest Jewish merchants, in 1806 cemented his position in the capital. Upon arriving in London in March 1809, Nathan moved to New Court St Swithin’s Lane, establishing N M Rothschild as a finance house dealing in bullion and foreign exchange. The Manchester business was renamed 'Rothschild Brothers', but by 1811 was wound up in favour of N M Rothschild of New Court in the City.
The Waterloo Commission
Temporary access to funds invested by the parent house in Frankfurt for William IX of Hesse-Cassel greatly increased the scope of Nathan's London operations. Profitable speculation in British and foreign securities and prominent dealing in foreign exchange and bullion during those early years was facilitated by an extensive and confidential network of merchants, correspondents and agents throughout the Continent, whose business interests were knit together by the common bonds of their Jewish identity. By 1814, N M Rothschild & Sons was uniquely placed to fulfil the prestigious British Government contract to purchase and transport gold coin across the Blockade to finance Wellington's army. Nathan Rothschild was recommended to the Chancellor of the Exchequer, Vansittart, by J C Herries, the Commissary in Chief to the British Government, to be commissioned to supply funds to Wellington’s troops, on campaign against Napoleon. During the complex operation to acquire, mint and ship the coin that they purchased in secrecy, the markets remained steady: none of the dealers suspected that the ultimate buyer was the British Government. After the victory at Waterloo, of which the Rothschild courier network was reputedly the first to bring news to Her Majesty's Government, the London house won a further contract to handle English subsidy payments to the European allies, confirming the ascent of N.M. Rothschild & Sons as leading City merchant bankers to rival Barings.
The first major loan business of the London house was the Prussian Government 5% Loan of 1818. The loan issued by Nathan Rothschild for Prussia in May of 1818 is considered by many to be the true precursor of the public borrowing which transformed the international capital market in the nineteenth century, and marked the beginning of the bank's specialisation in foreign loans for which Nathan introduced an arrangement for dividend payments to be made in London and in sterling, which increased the popularity of such issues in the City. During a wave of Latin American investment in London at this time, N.M. Rothschild & Sons negotiated a significant contract to finance Brazil's newly won independence, adding that country to a host of sovereign clients for whom they acted as London agents. The London house issued 26 British and foreign government loans between 1818 and 1835.
The Alliance Assurance Company
In 1824, Nathan, together with other prominent London Jewish financiers, established the Alliance Assurance Company. There were obvious attractions for such a venture; Nathan was often forced pay high premiums to insure his international shipments of bullion and other goods, and would have been particularly keen to break the monopoly held by Lloyd’s on marine insurance; Jews at that time were discriminated against by Lloyds. Nathan and Moses Montefiore resolved to form an insurance company to rival and circumvent Lloyds, with a larger share capital and a more influential Board of Directors.
Meanwhile, Nathan's elder brother, Salomon, was establishing himself as a merchant in Vienna and with the direction and support of the London house secured a series of major loan contracts from Prince Metternich to finance Austria's sovereign debt. Nathan and his brothers received recognition for these services to the House of Austria in 1822 when they were created Barons of the Austrian Empire. By then, Nathan's two younger brothers, Carl and James, had opened banks in Naples and Paris respectively, forming together with the parent house in Frankfurt a unique and financially powerful European partnership of five, profit-sharing banks. Their combined resources constituted the necessary reserves to support Nathan Rothschild's intervention during the liquidity crisis of 1826 when he was able to save the Bank of England from suspense of cash payments with an instant injection of gold in the wake of a number of banking failures.
Many of the business areas in which the Rothschilds excel today can be traced to Nathan's time: bullion, services to government, and experience of industrial finance, including expertise in natural resources.