In 1872 proposals were formalised for what became the Banbury and Cheltenham Direct Railway. It was to run from the
GWR's Oxford line at
Kings Sutton, and use the Chipping Norton branch and the Bourton-on-the-Water Railway as part of its route. The proposed capital was £800,000; this proved to be a significant underestimate. Considerable deposits of
haematite iron ore were known to exist on the line of route at the eastern end. There was a demand at the South Wales ironworks for this material, as modern
smelting methods required a mixture of raw materials and the Welsh iron ore needed to have an admixture. The '''''' (
36 & 37 Vict. c. clxxii) received royal assent on 21 July 1873. At Chipping Norton Junction, later , there was to be a
flyover across the main line for the benefit of through trains. An alternative proposal was considered, to make a loop entering from Chipping Norton in to the junction from the south, enabling through operation without the cost of a bridge, but this was not proceeded with. Acquisition of the necessary land proved to be exceptionally difficult, and the scale of the engineering works was greater than was originally thought: the
cutting near
Hook Norton was said to be one of the largest attempted in England. Extremely difficult weather conditions, failure of the contractor Alfred Terry to honour promises about the speed of completion of work, and a very considerable cost overrun beset the works. In 1876 it was apparent that completion of the line was not possible without additional finance, and an extension of the time allowable by the original act, and the company went to Parliament in 1877 seeking additional capital. A further £400,000 in debenture shares was authorised by the '''''' (
40 & 41 Vict. c. cix) of 23 July 1877, with further time to complete land acquisition as well as the actual construction. The viaducts in the vicinity of Chipping Norton were not on the intended route which was to have passed further south. Indeed, construction of the cutting to the south had already started when the revised route was announced. ==Construction and opening==