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This question is a little faction-specific:
The British Isles are divided into 4 towns and 3 castles. I personally feel that two castles would be more than sufficient for either Scotland or England. My question is this; which out of the 3 castles should I turn into a town? Nottingham, Inverness or Caernaveron? Thanks!
It's been a while since I played England (or MTW2, for that matter, due to comp problems) but I remember Inverness being fairly worthless as far as income when changed to a city. On the other hand, it's also the worst for transporting troops from, being further away from almost any front. It also grows slowly making it slow to upgrade (then again, a high chiv governor can fix that).
I think of those three Nottingham will make the most money as a city, but would also upgrade the quickest and provide the best troops.
Due to it's location, Inverness isn't in the best position to produce troops. Too far from any outside war. Even if it doesn't produce a ton of income, far better to have it produce some income, so I'd convert it to a city.
I'd also eventually convert Caernaveron once the main fighting near the isles has ended. If you have Caen, you really don't need more than Nottingham as a Castle on the isles.
Nottingham's position allows it to quickly reinforce the northern regions on the mainland, as well as a good position to recruit troops for a naval invasion over to Scandinavia as well as other regions bordering the North Sea.
You should switch all three to towns and grow them as quickly as possible as I explained here:
https://forums.totalwar.org/vb/showthread.php?t=114830
You need two citadels; one specialized for the knight’s guild and one for the archer’s guild. I chose Nottingham and London, respectively, because I got them up to the 9000 population threshold first. This allows you to get a big technological advantage. Send your merchants to Timbuktu and Arguin and you will never miss the income these two might make as cities.
For maximum efficiency; convert both Inverness and Caernaveron to cities. If you have already united the British isles then there will be no internal threat. Concentrate on making Nottingham the troop production centre for your kingdom, preferable with an archery guild.
Ditto. These days I often convert Caen to a city as well, as Nottingham is close enough and more advanced.