The growth in the use of steam engines in factories created a tremendous demand for coal. Where possible, coal was transported to the factory owners by canal or river. However, they still had the problem of finding an efficient way of getting the coal to the waterways.

For a couple of hundred years, collieries had used wagonways to transport coal to the nearest waterway. This involved horses pulling carts on wooden tracks. Whereas a horse could normally only carry 3 cwt, by using wagonways or iron railroads a horse could pull over 3 tons (60 cwt). It is estimated that in the later 18th century there were 1,500 of these horse tramways in Britain.

The problem with horse-drawn railroads was that they were extremely slow. Richard Trevithick, a mining engineer from Cornwall, began experimenting with a steam-engine that he hoped would eventually replace the horse. By 1803 his locomotive was able to travel at nine miles an hour. However, Trevithick's locomotive kept on breaking the cast iron rails and colliery owners rejected his invention.

At the beginning of the 19th century, companies began building railroads and charging people to use them. The first freight railroad was opened between Croydon and Wandsworth in 1803. Four years later, a passenger service was started in Swansea.

George Stephenson, an engineer at the Killingworth colliery, was also experimenting with locomotives. In 1812 he produced a locomotive that was good enough to carry the coal from the colliery to the River Tyne, six miles away.

Edward Pearse, a colliery owner from Darlington, was impressed with Stephenson's achievements and asked him to build a railway from his colliery to the navigable estuary of the Tees at Stockton.

Stephenson had recently discovered that John Bedlington, an iron manufacturer from Northumberland, had developed a way of making very strong iron. This wrought iron was ideal for railway tracks and successfully carried the weight of Stephenson's locomotive.

By 1825, locomotives on the Stockton to Darlington railway were hauling trains of up to eighty tons at speeds of fifteen miles an hour. The reduction in his transport costs enabled Pearse to cut the price of his coal from 18s. to 8s. 6d. a ton.

It soon became clear that large profits could be made by building railways. A group of merchants from Liverpool and factory owners from Manchester recruited Stephenson to build them a railway. The main objective was to reduce the costs of transporting raw materials and finished goods between Manchester, the centre of the textile industry, and Liverpool, the most important port in the north of England.

This posed a serious economic threat to the Bridgewater Canal. The Marquess of Stafford, who had become the principal owner of the canal after the death of the Duke of Bridgewater, led the fight against the planned railway. Turnpike Trusts, coach companies and farmers also voiced their opposition. However, in 1826, after several years of debate, Parliament gave permission for the Manchester and Liverpool Railway line to be built.