The British canal system became largely obsolete when the Railways came. Partly because the railway companies bought the canals and closed them to strengthen their monopoly. The canals were restored and reopened by enthusiasts for leisure boating, and in this is still going on. This is strengthened by the tow paths being legal rights of way, and walking them is very popular.
Canal boats had no engines, they were pulled by horses and very slow and dependent on a lot of horse care and feeding. Some of the early static steam engines were used to pump water up the canals to re-use it in locks, and there were lock keepers to employ and dredging to do, so it's not even as if the canals were a sunk cost and had almost no running costs.
I'd not be surprised that industrialists would do such a thing as buy up the competition and shut it down, but I'd be a bit surprised if canals were much competition after railways really came in?
I don't think they were competetive for most goods once the railways came, but I understand they were still working (with engines) right up to the 1960s. I guess not all goods needed to arrive quickly. I believe the canals freezing in winter added to the problems. I just checked Wikipedia and some went on to the 1980s!
Railway companies did buy and close them though. On one local one they made permanent destructive changes to stop them being easily reopened.
