Hallam and Persie continue their love affair during illicit meetings at The Dorchester. Lady Agnes, aware that there's something wrong with her marriage and worried about the looming war, takes her two children to the countryside for a while, leaving Hallam and Persie alone in the big house.
Mr Pritchard is given the great honour of being asked to join the board that prepares the annual Servants Ball at Albert Hall. At the first meeting he notices that Lady Malcolm acts rather snootily, declaring that simple food should be enough for the servants. (Mrs Thackeray had complained to Pritchard that Belgravia Catering did a poor job the year before.)
Harry boards up the windows of the servant's quarters, preparing the house for possible gas attacks. He tells Beryl that he's fed up with the situation in England and dreams of America.
Once more Hallam gets very frustrated with decisions made by the Foreign Office, this time about who will negotiate with the Soviets in an attempt to avoid a Soviet-German pact. George, Duke of Kent, agrees with him. Hallam confides in the Duke that he also fears his marriage is over.
At the next meeting for the preparation of the Servants Ball Pritchard makes some interesting suggestions that meet with approval of Lady Malcolm. He also makes an impression on another member of the board, Miss Whisset. Pritchard asks her out to tea and they decide to go to the pictures on Wednesday afternoon.
Harry makes some enquiries at the American Embassy. It seems that he and Beryl can easily emigrate to the States. He explains it all to Beryl and asks her to marry him. After some hesitation Beryl accepts. The servants are delighted to hear the good news, but Sir Hallam feels Harry is deserting Britain. Persie gives Beryl one of her robes as an engagement present. When Beryl walks into Harry's room wearing the robe, Harry mistakenly calls her 'Persie'. He has to admit his past indiscretion, which shocks Beryl.
Pritchard asks Miss Whisset to tea at Eaton Place. The pleasant meal is disturbed by Hallam who demands that Harry drives him to the Ministry. The Soviets and Germans have signed a non-aggression pact, which makes a war between Germany and Britain more likely.
On his second visit to the American Embassy Harry discovers that the emigration rules have changed. The Americans will now only accept people with certain skills or with enough money. Both are a problem for Harry. Persie visits Hallam in his room, and Hallam talks to her about his worries. He mentions the nickname people at the Ministry have for the negotiator: Lord Acronym.
At the Servants Ball the younger members of staff dress up as characters of literature. Johnny goes as Robin Hood, Eunice as Maid Marian. The ball is a great success, but then Hallam hears that the Germans know the nickname Lord Acronym. How did they hear about that. Did Persie tell them?
Miss Whisset dances with the Duke of Kent, who then teaches Mrs Thackeray how to make a manhattan cocktail. Harry takes Hallam aside and asks for 100 guineas to keep his silence about Hallam and Persie's affair. Hallam is willing to pay the sum so Harry and Beryl can emigrate.
Mrs Thackeray talks to Miss Whisset about Pritchard. Mrs Thackeray mentions the fact that Pritchard was a conscientious objector during the war. This comes as a shock to Miss Whisset who admired all the men who gave their life for the good cause. She tells Pritchard that she can't see him any more. Pritchard is so upset that he gets drunk for the first time in his life.
Hallam goes home to see Persie, but she's gone. She's at a hotel where she meets some Germans.
The next morning Lady Agnes returns from the countryside. She find Pritchard drunk on the pavement.