Clayton Equipment Ltd was preceded by Clayton Carriage and Wagon, a company based in Lincoln, England. As well as railway rolling stock, Clayton Carriage and Wagon also constructed motive power such as steam-powered railcars, including one of only two steam railcars to operate in New Zealand.
At the start of the Great Depression, Clayton Carriage and Wagon went into receivership and its Chief Draughtsman incorporated the Clayton Equipment Company Ltd in 1931 to continue supplying spare parts and maintenance for Clayton's products.
After World War II, Clayton Equipment Ltd experienced significant growth as it acted as a subcontrator of International Combustion Ltd, constructing various products such as farming equipment and industrial conveyors in response to a post-War shortage. The expansion necessitated the acquisition of new premises in Hatton, Derbyshire, and in 1957, Clayton Equipment Ltd became an independent unit wholly owned by International Combustion Ltd.
British Rail, as part of its dieselisation scheme, contracted Clayton Equipment Ltd to supply eighty-eight diesel-electric locomotives (what would later be known as the BR Class 17), and other orders were fulfilled for international customers from nations as diverse as Cuba and Poland. In the mid-1960s, Clayton designed and manufactured a special rubber-tyred locomotive of especially small size to work in mines, and this became one of its most popular products. It was mainly supplied to British mines, but as the British mining industry went into sharp decline, Clayton was required to promote its product heavily to international customers to retain a sustainable level of business.
After a number of changes of ownership at higher levels, Clayton Equipment Ltd came to be owned by Rolls-Royce in 1989. It nonetheless retained a significant measure of autonomy, and in March 2005, it became an independent company again.
Much of the company's orders now come from overseas, including Ireland and Russia. The company's main products are locomotives for underground mining, including battery-electric and diesel-hydraulic types. It also provides equipment refurbishment and training.
Four new 75hp battery powered locomotives named Walter, Lou, Anne and Kitty were built by Clayton Equipment in Derby to haul materials and plant along the line during the closure of the Waterloo and City Line. These have since been reused on the East London Line.
After becoming an independent company the part owner and managing director is Steven Gretton.