In the summer of 1862, the exhaustion of Britain’s surplus of cotton and recent military successes by the Confederacy put pressure on the administration of Lord Palmerston, the British prime minister, to intervene diplomatically, if not militarily.  In fact, Britain and France contemplated a plan (never carried out) to mediate between the Union and Confederacy, which would have meant de facto recognition of Confederate independence.  What most enraged the Union, though, was the construction and refitting of Confederate ships in Liverpool, England. 

The British shipyards built several Confederate blockade-runners, which poked holes in the Union blockade (although the Union Navy deterred most attempts).  That was bad enough in Union eyes, but in March 1862, the Confederacy went further by commissioning a warship (commerce raider) to be built in Liverpool.  British law prohibited the construction and arming of a belligerent’s warships in British shipyards.  However, the spirit of the law was circumvented by building the ship in Liverpool under forged papers showing its ownership by the Italian kingdom of Palermo, and then fitting it with arms, transported by a British ship, in the British Bahamas.  It joined the Confederate fleet as the Florida, destroying 38 American merchant ships until it was captured in October 1864 off the coast of Brazil.

The vigorous protests of Charles Francis Adams, the U.S. minister to Great Britain, nearly succeeded in halting the launch of a second Confederate cruiser, but it left port in the summer of 1862 on an alleged trial run, never to return.  It docked in the Azores, where it was fitted with arms, and then sailed as the CSS Alabama, under the command of Raphael Semmes.  Semmes had already demonstrated his talent as captain of the CSS Sumter, a blockade-runner that captured 18 prizes until he was forced to abandon it.  Under his command, the swift and mighty Alabama proved to be a highly effective vessel, seizing or destroying 69 Union ships over its career before being defeated by the USS Kearsarge in June 1864 off the coast of France. 

Buoyed by their success in launching the Florida and Alabama in the summer of 1862, the Confederacy contracted with a British shipbuilding firm, Laird, for the construction of two armor-plated ships (called Laird rams), armed with guns and a seven-foot iron spike intended to pierce wooden vessels below the waterline.  Adams intensified his protests to the British government, culminating in a terse warning to the British foreign minister, Lord Russell:  “It would be superfluous in me to point out to your Lordship that this is war.”  The Palmerston government had already decided to detain the ships, but Adams’s resolute stance made him a hero in the Union.

Although the Britain government had reversed its formerly lenient policy, the issue of British construction and refitting of Confederate warships during the Civil War continued to be a major impediment to improving U.S.-British relations in the post-war period.  This controversy, collectively called “the Alabama Claims,” was finally resolved in 1872 by an international board of arbitration, with Britain agreeing to pay the United States $15.5 million in damages.