Quoting Neil Forbes’s Doing Business with the Nazis: Britain’s Economic and Financial Relations with Germany, 1931–1939, pages 122–4:

Following the fateful Munich conference in September 1938 Magowan repeated his criticisms of what he now regarded as a discredited policy. He caused, thereby, a minor sensation in Whitehall. As [the Third Reich] was ‘practically at war’ with Britain, he wanted trade relations surveyed afresh in order to give weight to factors other than the purely commercial.⁹⁴

This so perturbed the Department of Overseas Trade that Magowan was temporarily recalled to London.⁹⁵ Undeterred, he carried on his solitary campaign to show how [the German Reich] was able, between 1932 and 1938, to reconstitute imports from Britain.

TABLE 3: ANGLO‐GERMAN TRADE 1929–38 IN £MILLION

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Year British exports to Germany (re‐exports) British imports from Germany Balance to Germany

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1929 60.2 (23.3) 68.8 8.6
1930 44.1 (17.3) 65.5 21.4
1931 32.0 (13.6) 64.2 32.2
1932 25.4 (10.8) 30.5 5.1
1933 24.6 (9.8) 29.8 5.2
1934 22.9 (8.9) 30.6 7.7
1935 28.1 (7.8) 31.8 3.7
1936 27.9 (7.4) 35.3 7.4
1937 31.4 (8.0) 38.8 7.4
1938 28.5 (6.6) 31.9 3.4

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Source: compiled from UK Customs and Excise Dept, Annual Statement of the Trade of the United Kingdom 1932, IV (1934), 1935, IV (1937), 1939, IV (1941).

TABLE 4: GERMAN IMPORTS OF CERTAIN COMMODITIES FROM THE UK IN RM000s

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Commodity Average imports 1932/33 Exchange available in 1937 under Payments Ag. quotas (based on 1932/33 trade returns) Actual Imports 1937

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scrap iron and steel 1,408 1,126 3,900
copper 4,326 3,461 19,876
lead 40 32 1,728
aluminium 932 746 1,959
platinum, palladium and irridium 822 658 5,765
rubber, gutta‐percha and waste 102 81 1,575
glycerine 150 120 1,227

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Source: abstracted from T 160 821/12750/086, memo, by Magowan, 3 Jan. 1939.

How methodologically sound it was to compare the depth of the slump — 1932/33 — to the peak of the moderately strong recovery in 1937 was open to question: the resumption of some kind of predepression trade pattern might have been expected in any case. What was incontrovertible was the evidence of the significance of access to London’s world‐wide market in raw materials.

The Payments Agreement had come to play an important rôle in British trade: in 1938 [the Third Reich] was, after India, the UK’s best customer, taking exports to the value of £20.6m. This just exceeded exports to the USA at £20.5m and Argentina at £19.3m. Clearly, Britain provided not only a margin of free exchange but also the best market in which to spend it.

A large proportion of these ‘gratuitous’ German imports comprised strategic raw materials rather than the consumption goods reflected in the spending pattern of the early 1930s. The [Reich’s] authorities depended upon free sterling, therefore, not only for the successful working of their exchange‐control system, but also for the purposes of rearmament.⁹⁶

Page 161:

In analysing the links between British industry and the Third Reich, a line may be drawn between manufactures connected in some way with the arms trade and companies involved in supplying raw materials; while the former were under the watchful eye of a public ready to condemn any transgression, the latter drew little, if any, criticism for their foreign operations.

In the absence of any particular pressure from popular opinion, government policy continued to concentrate on the need to nurture Britain’s fragile economic recovery: anxieties over the implications of German rearmament were outweighed by fears that the imposition of official controls would damage business. British multinationals were largely left to decide for themselves whether to exercise self‐restraint and forgo commercial opportunities.

Quoting J. Adam Tooze’s The Wages of Destruction: The Making and Breaking of the Nazi Economy, pages 70–1:

Britain and [the Third Reich], the two largest economies in Europe, moved perilously close to an all‐out trade war. Such a confrontation would have had incalculable effects on [the German Reich’s] economic recovery. Britain was not only [the Third Reich’s] main export market and hence its main source of hard currency; the British Empire was also the chief source of many of [the Third Reich’s] imported raw materials. To make matters worse, the City of London was the chief provider of short‐term finance for German foreign trade.

Even if German imports were not British in origin, they were, more often than not, financed by British banks. A concerted effort by Britain to punish [the German Reich] for its default would have had a serious impact on [the Fascist bourgeoisie’s] still fragile régime. Certainly, the Reich Minister for Economic Affairs was feeling the strain.

(Emphasis added in all cases.)