Attracted by higher wages and the promise of regular employment, in the late 1770s local workers moved into the new cotton mills. By the end of 1778, 11 other mills had joined Clegg's original Lees Hall Mill. Oldham's mills employed over 500 people, the majority of its population at that time. The introduction of Samuel Crompton's Spinning Mule in the 1780s enabled the industry to expand ever faster. Surviving woollen merchant's, quite understandably, objected to the spread of cotton mills, and took steps to impede the industry's progress. They successfully lobbied parliament and in 1784 a special tax was imposed on cotton cloth, forcing the industry into an instant depression.

Many protest meetings followed in Manchester, led by powerful local industrialists like John Lees of Clarksfield and James Brierly of Hollinwood, which culminated in an 80,000 signature petition being submitted to London. This powerful pressure group managed to get the tax repealed within a year, and prosperity returned to the cotton industry. The obvious burgeoning success of cotton, sounded the death knell of Oldham's woollen goods.
At the Manchester Fair of 1788 about half of the goods displayed by Oldham merchants were of wool - though all of these were from the Saddleworth area. Not one merchant attended the Manchester Fair in 1794 to sell woollen products.

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