Bailey was born in 1789 in Great Wenham, Suffolk, the son of John Bailey, of Wakefield and his wife Susannah. His parents had moved from Normanton, near Wakefield in around 1780 by which time they had already had at least three children (Ann, Elizabeth and William). Crawshay was the youngest of a further five children to be born in Great Wenham (the others being Susan, Joseph, John, and Thomas). His mother, Susannah was the sister of Richard Crawshay, the Ironmaster based at Cyfarthfa Castle near Merthyr Tydfil where Crawshay Bailey came at the age of twelve to work for his rich uncle in 1801, joining his elder brother Joseph. In 1809 he was a witness to his rich uncle's will, in which he was bequeathed the sum of £1,000 (equivalent to £55,000 in today's terms 2007 ).
Crawshay Bailey's early career was overshadowed by that of his elder brother, Joseph, later Sir Joseph Bailey, 1st Baronet, who, on his uncle's death in 1810 inherited 25% of the Cyfarthfa Works where he had been the manager. Joseph Bailey sold his share in Cyfarthfa, and together with Matthew Wayne later of Gadlys, Aberdare, he bought Nantyglo Ironworks from the Blaenavon Iron Company. At some point, Crawshay joined his brother at Nant-y-glo and, upon Wayne's departure to Aberdare, he became a partner with his brother in 1820. They afterwards bought the Beaufort ironworks and several collieries in the vicinity.
In contrast to most of his fellow iron masters, Bailey recognised the potential for the future development of the coal industry in South Wales, and far-sightedly bought up large areas of coal-rich land, at their agricultural value too, in the Rhondda Valleys, at Mountain Ash and Aberaman and was prepared to sit on these assets for nearly nine years before developing them as some of the richest coal and iron ore deposits in the world.
In a similar manner he waited until the most auspicious time before applying for a Parliamentary Act to open and run a railway company. In 1845 he was instrumental in setting up the Aberdare Railway, along with Sir John Josiah Guest to capitalise on further assets in the form of sinking new collieries and building new blast furnaces.