This in turn stimulated Scottish manufacturing, since, under the terms of the Navigation Acts, Americans were not allowed to trade manufactured goods. Scottish-produced linen, paper and wrought iron were exchanged for Virginia tobacco, and when the American War of Independence disrupted the trade in the 1770s and 1780s, the Scots successfully turned to trade with the West Indies and, most important of all, to the production of cotton textiles.

Glasgow?s west coast location gave it ready access to the sources of raw cotton in the Americas, while the rapid growth of the British Empire provided an expanding market for its finished cloth. Initially, the city's cotton industry, like the earlier linen industry, was organized domestically, with spinners and weavers working in their homes, but increased demand required mass production and a need for factories. In 1787, Scotland had only nineteen mills; by 1840 there were nearly 200.

The growth of the textile industry spurred the development of other industries. In the mid-18th century, the Carron Ironworks was founded near Falkirk, specializing in the production of military munitions. Here, the capital and expertise were English, but the location was determined by Scottish coal reserves. By 1800 it was the largest ironworks in Europe. The basis of Scotland's shipbuilding industry was laid as early as 1802, when the steam vessel Charlotte Dundas was launched on the Forth-Clyde canal. Within 30 years, 95 steam vessels had been built in Scotland, most of them on Clydeside. The growth of the iron and shipbuilding industries, plus the extensive use of steam power, created a massive demand for coal, and pit shafts were sunk across the coalfields of southern Scotland.

Industrialization led to a concentration of Scotland's population in the central Lowlands. In 1840, one-third of the country's industrial workers lived in Lanarkshire alone, and Glasgow's population grew from 17,000 in the 1740s to over 200,000 a century later. Such sudden growth created urban overcrowding on a massive scale and, as late as 1861, 64% of the entire Scottish population lived in one- or two-room houses. For most Clydesiders, 'house' meant a couple of small rooms in a grim tenement building, where many of the poorest families were displaced Highlanders and Irish immigrants, with the Irish arriving in Glasgow at the rate of a thousand a week during the potato famine of the 1840s.

By the late 19th century a measure of prosperity had emerged from industrialization, and the well-paid Clydeside engineers went to their forges wearing bowler hats and starched collars. They were confident of the future, but their optimism was misplaced. Scotland's industries were very much geared to the export market, and after World War I they found conditions much changed. During the war years, when exports had been curtailed by a combination of U-boat activity and war production, new industries had developed in India and Japan, and the eastern market for Scottish goods never recovered. The postwar world also witnessed a contraction of world trade, which hit the shipbuilding industry very hard and, in turn, damaged the steel and coal industries. By 1931, for instance, pig-iron production was at less than 25% of its 1920 output.

These difficulties were compounded by the financial collapse of the early 1930s, and by 1932 28% of the Scottish workforce was unemployed. Some 400,000 Scots emigrated between 1921 and 1931, and those who stayed endured some of the worst social conditions in the British Isles. By the late 1930s, Scotland had the highest infant mortality rate in Europe, while some thirty percent of homes had no toilet or bath. There was a partial economic recovery in the mid-1930s, but high unemployment remained until the start of World War II.