By Hannah Vinter
GLASGOW (Reuters) - Showy entertainment venues, museums and new housing blocks have replaced many of the shipyards that once lined Glasgow's River Clyde.
Long gone are the days when the area was an industrial powerhouse producing around a fifth of the world's ships - now Scotland's largest city promotes itself instead as a financial and commercial hub, soon to host the 2014 Commonwealth Games.
But although billions of pounds of investment have given Glasgow a shining new waterfront and growth in sectors like financial services, the city is struggling with an unemployment rate that rose sharply during the recession from 7 percent in 2008 to 11.7 percent in 2012.
"Glasgow seems to be doing a pretty good job cosmetically, it all looks great, but if the people don't have the pound in their pocket in order to participate in the things that are being brought into the city, what good is it to the poor people of the city," said Paul McLaughlin, Vice Chair of the Glasgow-based poverty charity WestGAP.
High levels of unemployment and deprivation in such a key city could be a worry for the Scottish government as it seeks to prove its economic viability ahead of a September independence referendum.
Yet tangible benefits have come from regeneration. Some 23,500 jobs have been created by new investment since 2003, according to Clyde Waterfront, a government partnership that has been facilitating a wide range of projects.
In the event of independence, "as Scotland's largest city should be a driver of prosperity," said Paul Swinney, senior economist at the think-tank Centre for Cities.
"But as with its counterparts south of the border, it punches well below its weight in terms of its contribution to the economy," he said.
One area of Glasgow that has thrived is its International Financial Services District, which has created some 15,500 jobs since 2001, Clyde Waterfront says.
But at the same time, around 30 percent of households in Glasgow were workless in 2012 - the highest proportion anywhere in Britain - according to data from the Office of National Statistics.
"It's almost two-speed," said Swinney, one of the authors of a 2014 report which rated Glasgow as the city with the highest level of inequality in Britain.
"The city centre is doing fantastically, but clearly there are a lot of people who still aren't accessing the opportunity."
Glasgow City Council Leader Gordon Matheson says the city is on the right path, and is taking steps to boost employment through apprenticeships and other schemes.
"We are increasingly diversifying our economy and we are putting our money where our mouth is to offer support to employers and training to individuals to get back into work," he said.
Although most of Glasgow's heavy industry disintegrated from the late 1960s, the city is still home to two major shipyards at Govan and Scotstoun in addition to one tiny commercial shipbuilder in Port Glasgow.
Run by British defence contractor BAE Systems, the major yards employ 3,200 people, including some seconded to another Scottish yard in Rosyth on the Firth of Forth.
But many of these workers face cuts after BAE announced in November that it would be ending shipbuilding in its southern English yard of Portsmouth and cutting some 835 jobs across its other sites in Glasgow, Rosyth and Filton.
Despite the redundancies, BAE's announcement looked like a vote of confidence in the Scottish yards, as the firm said it would be consolidating work in Glasgow and is currently considering 100 - 200 million pounds of investment to upgrade facilities there.
One option would involve bringing together production at a single site at Scotstoun and ending shipbuilding in Govan, a company spokesman said.
Many called the move to keep shipbuilding in Scotland a politically motivated one ahead of the referendum.
"I think it was the government sending a message: look, you are part of the UK, we want you to remain part of the UK, we will be giving you work to protect your jobs," said Jim Moohan, Chairman of the Confederation of Shipbuilding and Engineering Unions in Scotland.
But the decision to keep shipbuilding in Glasgow, currently the preferred location for a multi-billion pound project to construct Type 26 frigates, could still be thrown into doubt by a "yes" vote in the independence referendum.
"If you give somebody independence, you don't say ... 'just to get you on your way, to give you a good footing, we'll give you a 13 billion-pound contract,'" Moohan said.
Whatever happens to the Scottish yards, the numbers currently employed in the shipbuilding industry pale in comparison to the estimated 30,000 working in tourism-related jobs in Glasgow today.
Councillor Matheson says the shift towards services is a sign of increased resilience in Glasgow's economy.
"We can't be stuck talking about the demise of the 1970s," he said.
"We're building on the strength and increasing the diversification of our economy, but we're doing that by focusing on key sectors, and those are financial services, the cultural sector, engineering life sciences."
GOVAN - A SHIPYARD'S LEGACY
Glasgow's struggles with unemployment and poverty are very much apparent in Govan, the neighbourhood around one of the two remaining big shipyards. Once a thriving hub packed with workers, parts of it now rank as some of the most deprived areas in Scotland.
Major efforts have been made to redevelop the neighbourhood through the Central Govan Action Plan (CGAP), a multi-million investment programme launched in 2006.
Funded by Glasgow City Council with additional cash from the private sector and other agencies, the backbone of the plan has been the construction of some 500 new housing units in the area, where swathes of old tenements were pulled down following the swift decline of shipbuilding in the 1960s and 70s.
According to Susan Hanlin, who manages CGAP, despite the fact that many of units built for sale came on the market at the height of the recession, they were all sold.
"I think that's quite a phenomenal fact about how successful some of the regeneration has been," she said.
However, while housing in the area may have improved, Govan is still lacking some elements of basic infrastructure.
It stands just across the river from the new, 74 million-pound Riverside Museum and is not far from Glasgow's affluent West End, but lacks a local bridge connecting it to the wealthier areas on the far bank.
"If we could realise the bridge crossing across the river I think that would open up a whole new range of opportunities for Govan," said Hanlin.
(Editing by Stephen Addison)