It was founded in 1881 by James Kerr as James Kerr & Company, and became Kerr, Stuart & Company from 1883 when John Stuart was taken on as a partner. The business started in Glasgow, Scotland, but during this time they were only acting as agents ordering locomotives from established manufacturers, among them Falcon, John Fowler & Co. and Hartley, Arnoux and Fanning. They bought the last-named company in 1892 and moved into the California Works in Stoke to begin building all their own locomotives. Hartley, Arnoux and Fanning had also been building railway and tramway plant. This side of their business was sold to Dick, Kerr and Co. in Preston.