Looking about for something else I ran across this picture. It was to do with the whole common carrier mess and basically said that the railway companies had to accept loads even if they were out-size and bloody awkward to move, being done at night and using/closing multiple tracks, so that they made a loss on the job. It does suggest that larger tanks could be possibly moved but would interfere with other operations and probably have to take a circuitous route at night to fit. But I'm not the expert on these things.
Given the railway strikes prior to that which showed how the country could be brought to a standstill, I think most governments would be wary about spending more money on the railways. If money is going to be spent, its more likely to be on the roads.
Well there was certainly a large expansion of the road network in the 30s thanks to a previous rise in vehicle ownership plus as a works programme to help combat unemployment during the depression. Even here though
steam wagons such as the
Sentinel were still mostly used since they could generate 4-5 times as much power as petrol engines, Britain having missed the boat somewhat on diesel engines. You also had fairly draconian taxes on heavy goods trucks over a certain weight, IIRC until fairly late in the decade they were still importing key components from Germany, combined with the common carrier provision imposed on the railway companies by the government it does suggest that they still leaned more towards the railways for moving freight.
Also weren't the railways still in private hands until after the war? I was under the impression that the Big Four owned and ran things outright, or did the government own the tracks and stations? If it's private companies then I can't see them spending all the time and money on re-gauging, especially not when the common carrier provision that they often had to carry freight at a loss.
One possible point of departure could be the Royal Commission on Road and Rail Transport of 1931, it didn't get an anywhere but the follow on Salter Report two years later did apparently suggest modifying part of the common carrier provision. Suppose as a quid pro quo the government allows the railway companies to withdraw from running freight on some of the small branch lines with that being taking over by road haulage, they're not forced to take goods even at a loss, and in return they have to improve the loading gauge on certain key lines? Combined with the introduction of licensing for heavy goods vehicles and making them pay the full cost of maintaining the roads via taxation and petrol duties as happened in our timeline it would put the two industries on a more equal footing and hopefully spur both on.
Anything that disposed of the railway width restriction would be a good thing but I suggest (and have done a thread [Napier Culverin] on it previously) that it would have been better had they gone for a proper road tank transporter. This would not only free up tank design but be a potent force multiplier and strategic choice provider anywhere they wanted to deploy tanks.
Was Napier's Culverin engine a straight licensed built copy of Junker's Jumo 204 or did they make any alterations do you know? Since it seems to of been something of a forerunner of the Deltic, one of my favourite engines, for Napier more work on it in the 30s could have some interesting consequences.