At the end of the eighteenth century the Stroudwater Navigation and the Thames and Severn Canal had been opened and provided efficient and cheap transport to the towns it served.
The general area was engaged in woollen cloth manufacture, and there were also carpet mills, and the canals gave the nearby town of Stroud a considerable competitive advantage; accordingly, Dursley was declining, not being connected to a means of transport.
[1][2] In 1852 a meeting was held at Dursley at which there was considerable support for a branch line railway, but this took some time to arrange.
The line was also worked by the Midland Railway, but it was loss-making from the outset, particularly because of the need to make heavy interest payments on debentures.
[3] Fearing difficulty in avoiding bankruptcy, the company arranged to work the line itself from September 1857, using the construction contractor's 0-4-0T locomotive.
They bought it for £434 10s and hired two Midland Railway four-wheel coaches, but they found that this hardly made any saving in outgoings.
As early as September 1857 the suggestion was made that the company should sell its line to the Midland Railway, as the only way out of the financial difficulty.
The matter needed Parliamentary authorisation, and this was obtained in a Midland Railway General Powers Act on 28 June 1861.
The very limited goods traffic originating on the line was enhanced by the development at Dursley station of the works of R A Lister and Company, manufacturers of agricultural machinery and later, internal combustion engines.