This narrow alley's name was in general usage from the early 1800s. Its one of the few lanes from the Rocks which survived the clean-up and mass demolitions after the Bubonic Plague of 1901. So named either as a pun on the word "sewers", or because of its narrowness and it being a thoroughfare between two separate sections of The Rocks.
Suez Canal was one of the most unsavoury places in Sydney in its time. It was haunted by prostitutes and larrikins, there were brothels, sly grog shops and an opium den. At the end of a laneway in the courtyard near the British Seaman