It is decided to place a broad gauge railway from Lydney to Parkend, as well as extending the Moseley Green (later Mineral Loop) Branch to Foxes Bridge.
Six hundred tons of edge rail is delivered to Lydney.
A new broad gauge locomotive is ordered, with the existing fifth locomotive undergoing a conversion.
The new line (at this point running to Wimberry, just north of Speech House Road) is tested using No 5, now designated "Forester" and the new locomotive is delivered. However problems at Whitecroft delay the opening of the line with alterations to the route being ordered by the Commissioners of Woods. However, the alterations are not completed and the original route stands.
The first traffic is carried on the new line.
The S&W obtains approval for what will be become the Mineral Loop from Tufts Junction to Drybrook Rd, despite the opposition of the rival Forest of Dean Central Railway and the Great Western Railway.
Authorisation is obtained to construct what will become the Lydbrook Branch.
Construction of the Mineral Loop begins; however with the GWR now converting to standard gauge, it is decided that the Mineral Loop will also be standard gauge, with a third rail being added from Lydney to Tufts Junction.
April - May 1872
Traffic commences on the Mineral Loop, which now runs to the main S&W line at Wimberry. The main line is now converted to standard gauge.
Construction on the Lydbrook branch commences.
The Coleford branch is authorised. With the GWR also planning a line to Coleford from Monmouth, the race is on! The Severn Bridge Railway is also authorised.
Passenger services on the line are also authorised.
Construction of the Lydbrook Viaduct is started. This was probably the greatest engineering feat of the S&W.
The provision for passenger stations is begun.
Lydbrook Viaduct is completed.
Construction of the Severn Railway Bridge commences.
The Coleford Branch opens. At this point, most of the old tramway lines are redundant, although some are retained for transporting goods to the railway.
23rd September 1875
The first passenger train from Lydney to Lydbrook occurs.
9th December 1875
The first passenger train to Coleford occurs.
With the Severn Bridge Railway running into financial trouble, the only way to save the project is for the S&W and SBR to amalgamate and permit the Midland Railway running powers across both lines. This decision is taken reluctantly by S&W due to the possible threat to its relationship with the GWR. However full unification of the companies will not take place until 1885.
The expenditure of the past decade, especially the problems with the SBR, mean that the S&W starts attempting to reduce expenditure. During this period the S&W attempts to promote tourism to the Forest of Dean area and the process of replacing the iron rails with steel ones begins.
A six-week collier strike begins which drastically reduces S&W revenue. Although the company attempts to reduce expenditure, it is ultimately forced into liquidation.
The GWR line from Monmouth to Coleford opens to passengers.
The S&W obtains legal powers obliging the GWR to provide through rates for South Wales coal traffic to the South of England using the Severn Bridge. The battle is not over though as the GWR are able to stall proceedings until the Severn Tunnel is opened.
The S&W and SBR completely unite, and are able to end their period under receivership.
The GWR opens the Severn Tunnel and promptly starts undercutting the Severn Bridge rates, forcing the S&W to use canvassers to obtain trade and check traffic routing.
The coal trade in the Forest of Dean is down and the S&W suffers difficulties with finance and the state of its locomotive stock. At this point the company owns 13 tank engines, 12 0-6-0's and 1 0-4-0. Only the five original tramway locomotives have been disposed of.
The depression of the coal trade is now seriously affecting the S&W with dividends on preference stocks unable to be paid at this point.
September 1893 - June 1894
A sudden increase in coal demand comes too late for the S&W, who ironically are not in a position to cope with the demand. It is decided to sell the line to be run jointly by the Midland Railway and the GWR.