The successful opening of the Stroudwater Canal in 1779, inspired a scheme to extend the waterway across the Cotswolds linking the Severn with the Thames.

In 1781, John Priddey, an engineer who had worked on the Stroudwater Canal was commissioned to make a survey.

Priddey recommended a route which would join the Thames near Lechlade. A company was formed to build the new canal, and the necessary Act of Parliament was obtained in 1783.