Kerr, Mitchell & Neilson was formed in 1837 when Stewart Kerr joined Mitchell & Neilson who manufactured marine and stationary engines. In 1838 Walter Montgomerie Neilson (the son of James B Neilson) joined the firm and was called on to make the business a success.

By 1840 James Mitchell and William Neilson left the company, which was then effectively dissolved. James B Neilson (who had largely financed the Neilson & Mitchell venture) and Stewart Kerr formed a new company Kerr, Neilson & Co working from the Hyde Park Street works making locomotives, marine and stationary engines, but operating at a loss.