The 1.732 was calculated based on the strength of wrought iron, which would have been the usual material for bolts and nuts when the thread was introduced. And I am pretty certain square nuts and bolt heads were assumed.
By the start of WW2, most bolts and nuts used in any sort of engineering were being made from at least mild steel, and often with hexagons rather than squares. The decision was made to economise (as Ron says) on steel by reducing the hexagons by one spanner size, something that had already been done for  British Standard Fine (BSF), justified as almost all BSF fasteners were steel.
Original sizes remained in widespread use into the 60s, and possibly even into the 70s, especially for non-engineering uses. 
Whitworth was the first thread and spanner sizes widely adopted by multiple manufacturers. Introduced into Whitworth manufactures in 1841, they spread across manufacturers during the Crimean war as Whitworth outsourced a lot of parts to other engineering firms. By about the 1860s, they had become a de facto standard in the English speaking world (except the US did not copy them exactly). 
Before this, most engineering works (or even individual workmen) set their own standards. Some of these spread across whole industries - e.g. BSP for pipes and conduit and cycle threads, and continued in use into the metric era.
Another thread you will encounter on Series Landrovers is British Association thread (BA). This, introduced in 1884, and becoming a national standard in  1903, is a scientifically designed  metric thread, 6mm or smaller, used for instruments etc.
It is worth noting that not all manufacturers used standard threads, even to well after WW2. For example, Morris motors used French metric(not the same as ISO!) but with Whitworth hexagons from the late 1920s to the early 1950s, as did De Havilland engines. In both cases for historical reasons.
				
			 
			
		 
			
				
			
			
				John
JDNSW
1986 110 County 3.9 diesel
1970 2a 109 2.25 petrol
			
			
		 
	
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