Unfortunately for the Midland, its little scheme did not materialise. The well-known 1863 agreement between the Great Western and the Midland companies stated that they should "agree as to subscribing to any new lines in the districts in which the companies are directly interested". Captain Galton, of the Board of Trade, was appointed arbitrator and he denied the Midland's right. Powers were allowed to lapse and the railways dissolved in 1870. It is known work was started on the Wiltshire & Gloucestershire Railway at Malmesbury in July, 1865 (possibly on the tunnel, though so far no evidence has come to light), but the town was abandoned to the G.W.R. after the arbitrator's decision had been made known.
Malmesbury was determined to have a railway and the scheme which actually was carried out was that of the Malmesbury Railway. This was incorporated by an Act of July 25, 1872, to run from the G.W.R. at Dauntsey to Malmesbury, a distance of 6 miles 43 ch. Its estimated cost was £60,000, and the G.W.R. subscribed half of this sum.
The line was worked by the G.W.R. under an agreement of June 5, 1872, and was opened formally on December 17, 1877, "amid much rejoicings". A special train ran to Malmesbury, where it was received by a procession of the leading inhabitants. Regular traffic began the next day; a slight accident occurred when the gatekeeper at the crossing near Great Somerford failed to open the gates and the train dashed through and shattered them. It transpired that the old man in charge of the crossing could not get out of his house in time because the door handle came off in his hand! The Malmesbury Railway was taken over by the Great Western from July 1, 1880, under an Act dated August 6, 1880, allowing G.W.R. Ordinary Stock at the rate of £15 per £100.
