The rivers Mersey and Irwell were first made navigable in the early 18th century. Goods were also transported on the Runcorn extension of the Bridgewater Canal (from 1776) and the Liverpool and Manchester Railway (from 1830), but by the late 19th century the Mersey and Irwell Navigation had fallen into disrepair and was often unusable. In addition, Manchester's business community viewed the charges imposed by Liverpool's docks and the railway companies as excessive. A ship canal was therefore proposed as a way of giving ocean-going vessels direct access to Manchester. The region was suffering from the effects of the Long Depression, and for the canal's proponents, who argued that the scheme would boost competition and create jobs, the idea of a ship canal made sound economic sense. They initiated a public campaign to enlist support for the scheme, which was first presented to Parliament as a bill in 1882. Faced with stiff opposition from Liverpool, the canal's supporters were unable to gain the necessary Act of Parliament to allow the scheme to go ahead until 1885.
Construction began in 1887; it took six years and cost £15 million (equivalent to about £1.65 billion in 2011). When the ship canal opened in January 1894 it was the largest river navigation canal in the world, and enabled the newly created Port of Manchester to become Britain's third busiest port despite the city being about 40 miles (64 km) inland. Changes to shipping methods and the growth of containerisation during the 1970s and 80s meant that many ships were now too big to use the canal and traffic declined, resulting in the closure of the terminal docks at Salford. Although able to accommodate a range of vessels from coastal ships to intercontinental cargo liners, the canal is not large enough for most modern vessels. By 2011 traffic had decreased from its peak in 1958 of 18 million long tons (20 million short tons) of freight each year to about 7 million long tons (7.8 million short tons). The canal is now privately owned by Peel Holdings, whose plans include redevelopment, expansion, and an increase in shipping from 8,000 containers a year to 100,000 by 2030 as part of their Atlantic Gateway project.
The idea that the rivers Mersey and Irwell should be made navigable from the Mersey Estuary in the west to Manchester in the east was first proposed in 1660, and revived in 1712 by the English civil engineer Thomas Steers. The necessary legislation was proposed in 1720, and the Act of Parliament for the navigation passed into law in 1721. Construction began in 1724, undertaken by the Mersey & Irwell Navigation Company. By 1734 boats "of moderate size" were able to make the journey from quays near Water Street in Manchester to the Irish Sea, but the navigation was only suitable for small ships; during periods of low rainfall or when strong easterly winds held back the tide in the estuary, there was not always sufficient depth of water for a fully laden boat. The completion in 1776 of the Runcorn extension of the Bridgewater Canal, followed in 1830 by the opening of the Liverpool and Manchester Railway, intensified competition for the carriage of goods. In 1825 an application had been made to Parliament for an Act to allow the construction of a ship canal between the mouth of the River Dee and Manchester at a cost of £1 million, but "the necessary forms not having been observed", it did not become law. In 1844 ownership of the Mersey & Irwell Navigation was transferred to the Bridgewater Trustees, and in 1872 it was sold to The Bridgewater Navigation Company for £1.112 million. The navigation had by then fallen into disrepair, its owners preferring instead to maintain the more profitable canal; in 1882 the navigation was described as being "hopelessly choked with silt and filth", and was closed to all but the smaller boats for 264 out of 311 working days.
Along with deteriorating economic conditions in the 1870s and the start of a period known as the Long Depression, the dues charged by the Port of Liverpool and the railway charges from there to Manchester were perceived to be excessive by Manchester's business community; it was often cheaper to import goods from Hull, on the opposite side of the country, than it was from Liverpool. A ship canal was proposed as a way to reduce carriage charges, avoid payment of dock and town dues at Liverpool, and bypass the Liverpool to Manchester railways by giving Manchester direct access to the sea for its imports and its exports of manufactured goods. Historian Ian Harford suggested that the canal may also have been conceived as an "imaginative response to problems of depression and unemployment" that Manchester was experiencing during the early 1880s. Its proponents argued that reduced transport costs would make local industry more competitive, and that the scheme would help create new jobs.
The idea was championed by Manchester manufacturer Daniel Adamson, who arranged a meeting at his home, The Towers in Didsbury, on 27 June 1882. He invited the representatives of several Lancashire towns, local businessmen and politicians, and two civil engineers: Hamilton Fulton and Edward Leader Williams. Fulton's design was for a tidal canal, with no locks and a deepened channel into Manchester. With the city about 60 feet (18 m) above sea level, the docks and quays would have been well below the surrounding surface. Williams' plan was to dredge a channel between a set of retaining walls, and build a series of locks and sluices to lift incoming vessels up to Manchester. Both engineers were invited to submit their proposals, and Williams' plans were selected to form the basis of a bill to be submitted to Parliament later that year.