After serving an apprenticeship in nearby Stepney, he opened a yard – Yarrow and Hedley (a partnership) – at Folly Wall, Poplar on the Isle of Dogs in 1865 to build steam river launches.

Yarrow's stern wheel steamers, designed with a shallow draft suitable for river navigation, were used in the early stages of the 1884 Nile Expedition.

An operation in Esquimalt, Canada, was purchased in 1913, renamed Yarrows Ltd., and after the Second World War sold to Burrard Dry Dock.

[7][8] Created a baronet in 1916,[9] Sir Alfred displayed extensive philanthropic tendencies throughout his later years, donating towards: a convalescent home on the Isle of Dogs for the benefit of children; residences for soldiers' widows in Hampstead Garden Suburb (the Barnett Homestead, Erskine Hill);[10] a school, the Royal Merchant Navy College, in Berkshire; a home and hospital for children in Broadstairs, Kent; a scholarship at University College London; fellowships for research in natural science at Girton College, Cambridge; a gallery at Oundle School in Northamptonshire; and medical research at the Royal London Hospital, Whitechapel, among other noble causes.

His younger son, 2/Lt Eric Fernandez Yarrow (born 5 January 1895), was killed in action, aged 20, on 8 May 1915, whilst serving with the Argyll & Sutherland Highlanders.

In addition to his Baronetcy he was further honoured in 1922 as a Fellow of the Royal Society, and received an honorary degree of LLD from Glasgow University in 1924.