Most of Sudbrook was built as a new village for workers on the Severn Tunnel, on which construction began in 1873. The first cottages were built by contractor Thomas A. Walker in 1877, and rapid development took place over the next decade, including a school, post office, mission hall and infirmary. Some of the houses - originally known as Concrete Row, are believed to be the first concrete houses built in Britain.
Also built was a large pumping station, required to pump water from the tunnel, including three large brick engine houses housing six steam engines, and ventilation towers. The steam engines were replaced by electrical engines in 1962, and the chimney stacks taking smoke from the furnaces were demolished in 1968.
After the Severn tunnel was opened in 1886, Walker started a shipbuilding business at Sudbrook, using the same labour force. This continued in operation, building steamers of up to 700 tonnes, until 1926.
Between 1958 and 2006, local employment in the village was provided by a large paper mill, which made use of water from the tunnel.