On 7th July 1873 an Act was passed authorising an amended route with the WRMRU now branching from the Whitby – Grosmont line just outside Whitby Town station. The link to the proposed Scarborough line at Larpool Wood was dropped. By 1874 the construction of the railway had stopped and the contractor had gone into liquidation. Two of the
contractors locomotives which had been taken over by the WRMUR were sold. On 1st July 1875 the North Eastern Railway took a perpetual lease over the WRMUR and employed another contractor, John Waddell of Edinburgh, to complete the line with a completion date of 13th July 1881. The WRMUR Act ratified the arrangement on 19th July 1875 and the NER agreed to complete the line in a substantial and satisfactory manner.
The new contractor found the previous work to be unsatisfactory and in the short period whilst work was suspended part of the cliff route north of Sandsend had collapsed into the sea. The new contractors drove the railway through the headlands rather than go round them. Two tunnels were constructed, Sandsend tunnel (1652 yards) and Kettleness tunnel (308 yards);
between them a short stretch of the original course along the cliff edge remains.