Safdar Jung was succeeded by his son Jalal-ud-din Haider - Shuja-ud-daula, who stayed mostly at Faizabad, succeeded Safdar Jung. During his period of rule he was subjected to frequent interference by the British who curtailed his freedom with regard to the maintenance of troops and the signing of treaties with other regional rulers. He supported Mir Kasim in the Battle of Baksar in 1764 but was defeated, which compelled him to enter into a treaty with the East India Company, in addition to payment of 50 lakh of rupees. This was the advent of British on the soils of Avadh . The First British resident Mr. Middleton entered the court in 1773.The British extracted fifty lakhs of rupee from Shujaud-Daula and appointed a Resident at Lucknow. To pay for the protection of British forces and assistance in war, Avadh gave up first the fort of Chunar, then districts of Benaras, Ghazipur and finally Allahabad. Like Safdar Jang, Shujaud-Daula also had a Hindu minister, a Brahmin named Beni Bahadur. In spite of the of interference by the British, Shujaud-Daula administered Avadh well. During the reign of Shuja-ud-daula, Faizabad attained such a prosperity which it never saw again.Suja-ud-daula built a fort here which was known as Chhota Calcutta, now the fort has been ruined. He built the Chowk in 1765 and subsequently built the Anguribagh and Motibagh to the south of Faizabad and Asafbagh and Bulandbagh to the west of the city. The Nawabs graced Faziabad with several beautiful buildings, notable among them are the Gulab Bari, Moti Mahal and the tomb of Bahu Begum. Gulab Bari is a beautiful building of fine architecture, standing in a garden surrounded by a wall, approachable through two large gateways. These buildings are particularly interesting for their assimilative architectural styles. Shuja-ud-daula’s wife was the well known Bahu Begum, who married the Nawab in 1743 and continued to reside in Faizabad, her residence being the Moti-Mahal .Bahu Begum was a woman of great distinction and rank, who contributed significantly towards the growth and consolidation of her husband's government.Close by at Jawaharbagh lies her Maqbara, where she was buried after her death in 1816. It is considered to be one of the finest buildings of its kind in Avadh, which was built at the cost of three lakh rupees by her chief advisor Darab Ali Khan. A fine view of the city is obtainable from top of the begum’s tomb. Bahu Begum was a woman of great distinction and rank, bearing dignity. Most of the Muslim buildings of Faizabad are attributed to her. From the date of Bahu Begum’s death in 1815 till the annexation of Avadh, the city of Faizabad gradually fell into decay. The economy of the province continued to flourish and the city of Faizabad was adorned with stately buildings , both secular and religious thus Faizabad attained a prosperity, which it never saw again. Lucknow also continued to enjoy lkagrarian land commercial prosperity.

The Europeans writers, Franklin and scott, described Sjujaud-Daula as “An excellent magistrate, a lover of justice and anxiously desirous for the prosperity of his country, wise and dignified in character, affable, humane and generous". From its foundation in 1600 until the 1750s, the English East India Company confined itself largely to coastal commercial concerns - Madras (1640), Bombay (1668) and Calcutta (1690). As a joint stock corporation, it had as one of the goals to pay satisfactory dividends to its share holders which it did generously till 1858. The Company's victory over the Bengal Armies at Plassey in 1757 - left the company in possession of vast territory (three times the size of England). This conquest brought the English into direct collision with the aggresive political ambtions of current ruler of Avadh, Shuja-ud-Daula. Awadh and the Company first directly challeged each other when Shuja-ud-Daula marched his armies against the English, under the Mughal banner in 1764. The Company crushed these armies at the battlefield of Buxar. But given the vast extent of the Avadh the Company shrank from attempting to assert its own direct rule. The Company sought an Indian ruler to entrust with these lands. It decided to restore Shuja-ud-Daula to authority, but as its subordinate ally, and an effective buffer against hostile forces. He had proven abilities which Company desired to exploit. In the treaty of 1765, the company selected for annexation only part of Nawab's holdings and rest were restored to him on payment of Rs. 50,00,000. The ease with which the Nawab paid this vast sum whetted the Company's expectations of future extractions. To manage its relations with the ruler, the Company appointed a political agent, or Resident, at the Avadh court. Until 1772, the Company had transmitted the occasional message through an officer in its army stationed nearby but now the Resident would supervise the Company's interest. This Resident not only gradually moved to monopolise communications between the Nawab and the Company , he eventually intervened in virtually all aspects of the affairs of the state , thus estabilishing a system of indirect rule. Shujaud-Daula died on 26 January 1775, at the age of forty-three, leaving a full treasury supported by abundant revenue and was laid to rest at his mausoleum at Gulab-Bari, Faizabad.