Although a 2004 radio poll announced ‘Waterloo Sunset’ as ‘the greatest song about London’ and Time Out was to call it ‘the anthem of London’, when Ray Davies was originally composing the number he was initially going to call it
‘Liverpool Sunset’. When ‘Penny Lane’ by The Beatles was released around that time, Ray then decided to change the location to London.

Ray was to reveal that the Englishness of his compositions was inspired because The Kinks had been banned from appearing in America by the American Federation of Musicians, who objected to the fact that British bands such as The Beatles and Rolling Stones were dominating the American charts, so they began to ban further British bands, including The Kinks.

Ray recalled, "I remember they were concerned about a lot of English people coming over, making money in America. Of course, it was their culture and all of a sudden these Limeys came over and the charts were taken over by Brits. I thought I'd never get back into America again. They said they wouldn't ever give me a visa again, and certainly not for work, so I withdrew into my own Englishness and songs like ‘Waterloo Sunset’ came out. That's not such a bad thing".
The number was initially a track on the Kinks' fifth album ‘Something Else’ and when issued as a single it reached No 2 in the British charts.

In addition to composing the song, Ray produced the single, the first Kinks number not produced by A&R man Shel Talmy. Ray’s first wife Rasa provided backing vocals and Ray was to recall, “When the record was finished and it was coming out I got my wife Rasa to drive me down to Waterloo Bridge to see if the atmosphere was right… I’ve never worked with a song that has been a total pleasure from beginning to end like that one . . . "