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In Scotland, the Industrial Revolution was the transition to new manufacturing processes and economic expansion between the mid-eighteenth century and the late nineteenth century. By the start of the eighteenth century, a political union between Scotland and England became politically and economically attractive, promising to open up the much larger markets of England, as well as those of the growing British Empire, resulting in the Treaty of Union of 1707. There was a conscious attempt among the gentry and nobility to improve agriculture in Scotland. New crops were introduced and enclosures began to displace the run rig system and free pasture. The economic benefits of union were very slow to appear, some progress was visible, such as the sales of linen and cattle to England, the cash flows from military service, and the tobacco trade that was dominated by Glasgow after 1740. Merchants who profited from the American trade began investing in leather, textiles, iron, coal, sugar, rope, sailcloth, glass-works, breweries, and soap-works, setting the foundations for the city's emergence as a leading industrial center after 1815.
The linen industry was Scotland's premier industry in the eighteenth century and formed the basis for the later cotton, jute, and woolen industries. Encouraged and subsidized by the Board of Trustees so it could compete with German products, merchant entrepreneurs became dominant in all stages of linen manufacturing and built up the market share of Scottish linens, especially in the American colonial market. Historians often emphasize that the flexibility and dynamism of the Scottish banking system contributed significantly to the rapid development of the economy in the nineteenth century. At first the leading industry, based in the west, was the spinning and weaving of cotton. After the cutting off of supplies of raw cotton from 1861 as a result of the American Civil War Scottish entrepreneurs and engineers, and its large stock of easily mined coal, the country diversified into engineering, shipbuilding, and locomotive construction, with steel replacing iron after 1870. As a result, Scotland became a center for engineering, shipbuilding and the production of locomotives.
Scotland was already one of the most urbanized societies in Europe by 1800. Glasgow became one of the largest cities in the world, and known as "the Second City of the Empire" after London. Dundee upgraded its harbor and established itself as an industrial and trading center. The industrial developments, while they brought work and wealth, were so rapid that housing, town-planning, and provision for public health did not keep pace with them, and for a time living conditions in some of the towns and cities were notoriously bad, with overcrowding, high infant mortality, and growing rates of tuberculosis. Owners to support government sponsored housing programs as well as self-help projects among the respectable working class. Even with the growth of industry there were insufficient good jobs, as a result, during the period 1841–1931, about two million Scots emigrated to North America and Australia, and another 750,000 Scots relocated to England. By the twenty-first century, there were about as many people who were Scottish Canadians and Scottish Americans as the five million remaining in Scotland.