The Woollen Industry was established in the Middle Ages using home-grown wool. Production was based on the domestic system and Leeds in Yorkshire became the market centre where the cloth was exchanged and finished. The output of broadcloth in the area rose from 30,000 pieces in the late 1720s to 60,000 pieces in the 1740s. Leeds now covered 60 acres and by 1770 the town had a population of 16,000. Thirty years later, this figure had doubled.

After the invention of the Spinning Jenny some cloth merchants became factory owners. Several were opened in the Leeds area but by 1803 only one piece of cloth in sixteen was being woven in a factory. Power-loom weaving was introduced in the 1820s. Entrepreneurs in Yorkshire were more likely to employ steam power than other areas. The Woollen Industry declined rapidly in Devon, Somerset, Wiltshire, and Gloucestershire. By 1860s steam power was more important than water in the West Country but in Scotland only 65% of the power was still obtained from water.