The post war decade saw an average of 750,000 passengers a year being handled on the M.E.R, but the late 1940s saw numbers falling, as holiday habits were changing. Government reports were initiated in 1949, with the cost of replacing the 24 Cars and Trailers estimated at £110,000, in 1955 rising to £312,000, with another £292,000 needed to repair and replace the track, which was showing large amounts of wear and tear.
Experts in heavy rail operations were asked to submit their viewpoints, the consensus mainly to close the M.E.R beyond Laxey. In 1949, the official offices were moved from London to No.1 Strathallan Crescent (todays Horse Tram Depot), the newly installed board having to sell properties, including Dhoon and Ballaglass Glens, in order to cover the mounting losses.
At the end of 1955, the M.E.R directors notified Tynwald that they would have to cease operations after the 1956 season, preparing to sell the railways (M.E.R and Snaefell) for £70,000. A sub-committee was appointed to look into the matter, headed by British Rail specialists, who appointed a figure of £674,000 for the replacement of stock and track renewal. Another team of expert’s report was much more favorable, saying the maintenance cost wouldn’t be prohibitive if spread out, and the value of such a historic railway was incalculable!
In 1956, Tynwald met the M.E.R directors who were prepared to sell the railway for £50,000, just about the scrap value, the bill officially being signed in April 1957, with the railway nationalised and a 10 year track renewal programme initiated. On the 1st of June 1957, the railway was officially handed over with a ceremony at Derby Castle, and Car No.32 making a return trip to Groudle with designated guests traveling.
A 10 year plan was set out to renew the Derby Castle to Laxey section, financed by an annual grant. Orders were placed for 200 tons of rail, which was delivered to Ramsey along with 300 sleepers. Estimates for the following year had to be prepared by March 1958, and the operating and renewal costs were much higher than anticipated (£40,000 rather than £25,000), meaning a subsidy of 50% on each 5 shilling fare. This was met with fierce opposition and calls for the closure of the Ramsey section. The opposition was narrowly defeated in the House of Keys by 11-10, but the board was instructed to run the railway purely as a tourist attraction with no late or early departures and complete closure in the Winter. It was looking dark for the M.E.R…