B&ER offices, Bristol 1872 (GWR station in the foreground)
In January1860 the Bristol & Exeter Railway owned or worked 131 miles (210 kms) of line, all broad gauge, in the region between Bristol and Exeter. By February 1862, however, this had reduced to 107 miles (171 kms) when the Somerset Central Railway (SCR) and the Exeter & Crediton Railway took over operation of their own lines. The SCR merged with the Dorset Central Railway to become the Somerset & Dorset Railway (S&DR), and the Exeter & Crediton Railway had been acquired by the London & South Western Railway (L&SWR). Both the S&DR and L&SWR were standard gauge railways.
By the early 1860s, the increase in traffic meant the stations at Exeter, Taunton and Bristol were congested and needed replacement. The original stations at Exeter and Taunton were designed by Brunel and both had separate Up and Down stations, located on the same side of the main line. New stations were built with a single train shed and opened in July 1864 and August 1868 respectively. Upgrading Bristol station was a more difficult matter and needed the agreement of the Great Western Railway and the Midland Railway, both of whom were less than enthusiastic. It was not until 1871 that work began on building a joint station, which was partially opened in July 1874 for westbound traffic only. The new station at Bristol was not finally completed until 1878.
A number of branch lines were promoted by local interests to connect to the Bristol & Exeter Railway's main line. The West Somerset Railway was formed in 1857 by local landowners to build a branch between Watchet on the Bristol Channel to a junction with the Bristol & Exeter Railway a few miles west of Taunton at Watchet Junction, where Norton Fitzwarren station was later built. Because of financial difficulties, the 14½ mile (23 km) branch was not opened until March 1862 and the Bristol & Exeter Railway operated all trains under a lease arrangement. A westward extension from Watchet to Minehead was opened in 1874.
A local company was formed to build a branch between Taunton and Chard (12¾ miles - 20 kms), but couldn't raise enough capital to build the line. The Bristol & Exeter Railway took over the powers to build the railway and opened the branch in September 1866.
Another branch which its original promoters failed to build connected Yatton and Wells via Cheddar. Powers to build the line were taken over by the Bristol & Exeter Railway and the line opened in two stages in 1869/70. This was built as a broad gauge line but was converted to standard gauge in 1875 after the Great Western Railway line to Wells (with which it connected in an end-on junction at Wells) had been converted to standard gauge in 1874.
Another long branch promoted in this period was the Devon & Somerset Railway which eventually completed its 43 mile (69 km) line between Watchet Junction (near Taunton) and Barnstaple in 1873, but virtually bankrupted itself in the process. The Bristol & Exeter Railway operated this steeply graded line for half the gross receipts. The Devon & Somerset Railway continued as an independent company until 1901, when it was absorbed into the Great Western Railway.
In 1867, the Bristol & Exeter Railway added a standard gauge rail to its main line between Highbridge and Durston and between Durston and Yeovil on the Yeovil branch to defeat attempts by the Somerset & Dorset Railway and London & South Western Railway to build competing lines. This was followed in 1875 by adding a standard gauge rail to the whole of the Bristol and Exeter main line to avoid delays in transhipping goods with the now almost exclusively standard gauge Great Western Railway.
Towards the end of 1875, the directors of the Bristol & Exeter Railway contemplated amalgamation with a larger company and considered approaching both the Midland Railway and the Great Western Railway. An earlier proposal in the 1840s to merge with the Great Western Railway had been rejected by the shareholders of the Bristol & Exeter Railway, but in December 1875 they agreed to accept an almost identical offer made by the Great Western Railway. From the 1st January 1876, the Bristol & Exeter Railway was merged into the Great Western Railway.