A war savings poster/© IWM (Art.IWM PST 16545)

The Krupp patents debacle, which spiralled over many decades, suggested ‘national defence’ was a smokescreen for international profit making. As early as 1896, the leading German arms firm Krupp Works had been earning royalties on each ton of armour plate produced by Harvey United Steel, an international cartel which, in 1902, counted directors from British, American, French and German firms on its board. The implications of this case study are more disturbing still – German troops were torn to shreds by shells with fuzes stamped ‘Krupp Patent Zünder’ throughout the First World War.

Vickers – the second best capitalised arms firm in the UK (according to 1913 statistics) – and Krupp traded in weapons from 1902. Vickers cut deals allowing them to use the Krupp blueprints for time and percussion shell fuzes (no. 80 and no. 82 to be precise) in 1902, and for fuze-related machinery in 1908. They were contractually obliged to pay patent royalties for 15 years for each contract and communicate any improvements in design and manufacture to Krupp. Payments of royalties were contracted beyond the actual patent expiry date in 1914.

At the outbreak of war, all payments to Germany were suspended under the Trading with the Enemy Act. Vickers were supposed to deposit royalty payments with the ‘Custodian of Enemy Properties.’ The plot thickened when Vickers stopped paying royalties into that account for Krupp, while still including the royalties in the shell prices charged to the government.

Between 1914 and 1918 Vickers sold millions of fuzes to the British government; an estimated 14,139,000 fuzes of just type no. 80. By a tentative estimate from various Ministry of Munitions files, Vickers were paid by the government £10,764,000 for fuze no. 80 (£200,000,000 in 2005’s money). It is clear from just this one example that Vickers and their shareholders made handsome profits from supplying the Government’s war effort with ammunition. It is likely that the profit was tax-free.

Wartime correspondence shows that Vickers did pass royalty payments on to the Government in their invoices, rather than paying them from their own profits. Contracts signed by the government included 1 shilling 2d of royalties on each fuze.