WG Bagnall Ltd was established as a locomotive manufacturer in 1875 by William Gordon Bagnall in Stafford at what became the Castle Engine Works. Bagnalls first locomotive was produced in 1876, the company going on to produce machines for collieries and overseas plantations. The majority of the products that were manufactured were small four and six-coupled steam locomotives for industrial use, the company were noted for building steam and diesel locomotives in standard and narrow gauges. In 1891 Ernest Edwin Baguley joined the company, he left in 1902 to start his own business.

Bagnalls introduced several novel type of locomotive valve gear including the Bagnall-Price and the Baguley. They also used marine (circular) fireboxes on narrow gauge engines, a design that was cheap but needed a different firing technique. Some of the designs of Kerr, Stuart and Co were brought to Bagnalls when they employed William Sydney Edwards, the Chief Draughtsman of Kerr Stuart and Co. Examples of such locomotives can be seen on the Sittingbourne and Kemsley Light Railway. In addition to locomotives, Bagnalls constructed rolling stock and trackwork enabling the complete equipping of light railways. In 1933 Bagnalls entered into an agreement with Deutz of Germany to manufacture their locomotives under licence using engines imported from Germany. In 1948 WG Bagnall Ltd was sold to the Bridge and Steelwork Company, Heenan and Froude, whose owner also owned The Brush Electrical Engineering Co Ltd of Loughborough and in 1951, Bagnalls formed an association with Brush to create Brush-Bagnall Traction Ltd. This association only lasted two years. Heenan and Froude sold Bagnalls to W H Dorman & Co in 1959 in exchange for Dorman ‘A’ shares.