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The Railways Act of 1921, also known as the Grouping Act, was an enactment by the British government of David Lloyd George intended to stem the losses being made by many of the country's 120 railway companies, move the railways away from internal competition, and to retain some of the benefits which the country had derived from a government-controlled railway during and after the Great War of 1914-1918.
The British railway system had been built up by more than 100 railway companies, large and small, and often, particularly locally, in competition with each other. The parallel railways of the East Midlands, and the "war" between the South Eastern Railway and the London, Brighton and South Coast Railway at Hastings were examples of such local competition.
During World War I the railways were under state control, which continued until 1921. Complete nationalisation had been considered, and the 1921 Act is sometimes considered as a precursor to that, but the concept was rejected; nationalisation was subsequently carried out after World War II, under the Transport Act 1947.
After consideration of the Railways Bill it was decided that the Scottish companies, originally destined to be a separate group, would be included with the Midland/North Western and Eastern groups respectively, in order that the three main Anglo-Scottish trunk routes should each be owned by one company for its full length: the West Coast Main Line and the Midland Main Line by the former group, and the East Coast Main Line by the latter.
The opening paragraph of the Railways Act 1921 states:
"With a view to the reorganisation and more efficient and economical working of the railway system of Great Britain railways shall be formed into groups in accordance with the provisions of this Act, and the principal railway companies in each group shall be amalgamated, and other companies absorbed in manner provided by this Act." The Act took effect on 1 January 1923. By that date most of the mergers had taken place, some from the previous year. The Railway Magazine in its issue of February 1923 dubbed the new companies as "The Big Four of the New Railway Era".
These "Big Four" were:
A few lines remained outside the Big Four, many operated as joint railways. Examples include the Midland and Great Northern Joint Railway (M&GN) between the LMS and the LNER in eastern England, the largest of the joint railways; and the Somerset and Dorset Joint Railway (S&DJ) between the LMS and the SR in south-western England, perhaps the most famous of the joint railways.
Other exempted railways were light railways under the Light Railways Act 1896 and similar lines; although some such lines still chose to join the Groups. Those lines staying independent were principally those under the influence of Holman Fred Stephens, who had been instrumental in securing the necessary exemption.