The completion of the Liverpool dock network in the 1880's saw significant traffic growth along the Dock Road, where omnibuses, trains, carts, horse drawn carriages, drays and pedestrians congested the roads along with the numerous goods only railway crossings which connected the goods stations and docks. The extent of the congestion meant that a mass transit solution was needed to alleviate the problem. As far back as 1853, plans had been proposed for a high level railway in the area, but were blocked by the dock's engineer Jesse Hartley, as these plans could potentially make his plans for extension of the docks too expensive.
In 1877, a ship owner, Alfred Holt, suggested an overhead tramway, similar to the New York Elevated Railroad (which used steam locomotives). A plan was devised and eventually a fully double track line was proposed. The system was to run from Bootle to Herculaneum Dock, a distance of 6 miles. It was reported that the system would need the revenue from eight million passenger journeys per year to break even. Parliament refused to permit the Mersey Docks and Harbour Board to manage the railway, as concerns were expressed that MDHB was a non-profit making organisation. In 1888 a group of local businessmen formed the Liverpool Overhead Railway Company and obtained the powers by an Act of Transfer to run the system from the Mersey Docks and Harbour Board. Work commenced in October 1889 following the commission of leading engineers, Sir Douglas Fox and James Henry Greathead with JW Willans of Manchester, as the building contractor. The works finished in January 1893 with a running trial and inspection on 13th of that month. The Liverpool Overhead Railway was officially opened on 4th February 1893, by the 3rd Marquis of Salisbury, and Prime Minister Lord Robert Cecil. It was the first electrically powered overhead railway in the world and the first to be protected by electric automatic signals.
The line had cost a staggering £3,466,000 (or £331 million by today's standards). The track bed was made of rolled steel sheets to stop any unwanted debris falling upon unsuspecting passers-by or cargo. It also provided a welcome shelter from the rain, and hence was nicknamed the "Dockers Umbrella" by locals. By 1897, the targeted eight million passenger journeys were reached and the system began to make a profit.