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Collingwood was incorporated as a town in 1858, nine years before Confederation and was named after Admiral Lord Cuthbert Collingwood, Lord Nelson’s second in command at the Battle of Trafalgar, who assumed command of the British fleet after Nelson's death.

The land in the area was originally inhabited by the Iroquoian Petun nation, which built a string of villages in the vicinity of the nearby Niagara Escarpment. They were driven from the region by the Iroquois in 1650. European settlers and freed Black slaves, arrived in the area in the 1840s, bringing with them their religion and culture.

The area originally had several other names associated with it, including Hurontario (because it lies at the end of Hurontario Street which runs from Lake Huron — of which Georgian Bay is a part — south to Lake Ontario), Nottawa, and Hens-and-Chickens Harbour, because of one large and four small islands in the bay.

In 1855, the Ontario, Simcoe & Huron (later called The Northern) railway came into Collingwood, and the harbour became the shipment point for goods destined for the upper Great Lakes ports of Chicago and Port Arthur-Ft. William (now Thunder Bay). Shipping produced a need for ship repairs, so it was not long before an organized ship building business was created. On May 24, 1883, the Collingwood Shipyards, formerly known as Collingwood Dry Dock Shipbuilding and Foundry Company Limited, opened with a special ceremony. On September 12, 1901, the Huronic was launched in Collingwood, the first steel-hulled ship launched in Canada. The shipyards produced Lakers and during World War II contributed to the production of Corvettes for the Royal Canadian Navy. Shipbuilding was one of the principal industries in the town, employing as much as 10% of the total labour force. Overseas competition and over capacity in shipbuilding in Canada led to the demise of shipbuilding in Collingwood in September 1986.

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