In the spring of 2014, it turns out, Manchester isn't quite finished.

It's March, and in the city centre cranes stack up on the skyline twirling constantly like mechanical gymnasts raised on one leg. Men in hi-vis jackets swarm around St Peter's Square, which is undergoing major civic refurbishment, and round the corner at Victoria Station work has started on a Metrolink station for the trams, part of a £44 million revamp of the station.

Travel east to Beswick and Manchester City Football Club, fuelled by money from the club's owner Sheikh Mansour, are building a huge training facility that will eventually join up to Sport City, where the National Squash Centre sits beside the Eithad Stadium and the English Institute of Sport. Already the skeleton of a flyover sketches out the future route above a busy road. Half a century ago, this area was home to a coal mine and a chemical works. Industrial heartland. For a while in the seventies and eighties it wasn't home to very much. Now people come to use the gym in the squash centre or buy David Silva shirts at the Manchester City shop.

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"Manchester is the place where people do things … 'Don't talk about what you are going to do, do it.' That is the Manchester habit." His Honour Judge Edward Abbott Parry wrote that back in 1912 and Manchester still seems to cleave to that principle. But the city in 2014 is no longer Cottonopolis. It's beyond cotton and steel and all the industries that made it one of the richest cities during the industrial revolution. Manchester in 2014 is the city the Commonwealth Games built. And 12 years on, it appears, is still building.

As the Olympics in London proved, we are obsessed with the word "legacy" when it comes to major sporting events. Already, Glasgow 2014's legacy has been the subject of loud debate. What will it mean? What will it leave? Who will it benefit? The Games are never just the Games, important/inspiring/exciting as they may be. It's what they leave behind that matters.

In Glasgow that remains to be seen of course, but Manchester, the city that hosted the Games in 2002, might be one model. Perhaps the only model. When Manchester bid for the Games in 1995 (in the wake of a failed Olympic bid), the only positive example of the potential impact of such an event was the Olympics in Barcelona in 1992, three years before. "When we were preparing the Commonwealth Games bid all the comparisons were being made with Edinburgh," recalls Sir Richard Leese, leader of Manchester City Council. He is talking of the infamous 1986 Games that ran out of money and which saw the late Robert Maxwell step in to "save" it.

"Glasgow," he continues, "is going to be compared with Manchester 2002. Glasgow has put a lot of effort into checking out what did work in other places and what didn't. The approach Glasgow has taken has been one built on previous successes."

For that, Sir Richard would argue, read Manchester. Comparisons between the two cities make sense. Like Glasgow, Manchester is a city that saw its industrial heart torn out in the seventies and eighties, that suffers huge problems of deprivation (both have based most of their Commonwealth infrastructure in the east for that reason) and that has a strong, defiant, almost bolshy self-image (talking of both Glasgow and Manchester, broadcaster Terry Christian tells me: "They've got that f***-you-ness about them"). Perhaps then, Manchester is an indicator of what to expect in Glasgow in the years to come.

So it's worth asking: what is Manchester's legacy experience? What did the Games mean to Manchester? And how has the city changed?

That's why I am sitting in Sir Richard's office on the first floor of the Victorian splendour of Manchester Town Hall. On the wall there's a photograph of the Etihad Stadium, which started life, of course, as the Commonwealth Stadium. Sir Richard, although an incomer, belongs to the blue half of the city.

He became council leader in 1996. Four weeks later an IRA bomb ripped through the Arndale shopping centre, killing no-one but causing damage totalling an estimated £1 billion. It must have felt like the final insult to a city that had been suffering for decades.

But, if Sir Richard is to be believed, change was already on the way and Manchester's Commonwealth Games bid, made in 1995, was the vehicle.

"They were never seen as a one-off event," he points out."We started building sports development around it seven years beforehand. Some, like the velodrome, were built for our Olympic bid. But all of them had well-defined after-use and we knew how we were going to pay for them.

"We envisaged the concept of Sport City as putting the heart back into an area where everything had been taken out."

More than that, it was an opportunity to create employment for local people and local firms, he says.

The regeneration is still going on. Sir Richard talks of the new tram station, a new cross-city bus link. "There is a massive amount of work going on underpinning future growth." The regeneration was a 20-year plan, he says. But it needed the Games to kick-start it.

"Why sport? Opportunity as much as anything else. We had considered that an events strategy was a potentially important element in the regeneration. Not a one-off event for two weeks - even a very good two weeks - but a long-term events strategy. The profile of the city would bring people to the city. The Games are job creators. They have a lot of benefits."

In the first instance the benefit was pure and simple: pride and excitement.

Nearly everyone I speak to has a story to tell about the Games. Terry Christian, former presenter of Channel 4's The Word, remembers carrying the baton and handing it over to Tracey Shaw from Coronation Street. Former Hacienda DJ and writer Dave Haslam recalls sitting beside a swimmer on the bus and her showing him the bronze medal she had just won.

Will Collins was barely in his teens when the Games were on but he remembers going to watch the diving. "It was a long time ago but I do remember it. I would have been about 14. I didn't quite know what was going on, but it was great." Collins works in Evans Cycles NEC, a shop in the National Cycling Centre, home to the velodrome and a BMX track and itself only a Mark Cavendish sprint away from Sport City.

If you want to look for a sporting legacy from the Games you could do worse than start here. British Cycling was almost bankrupt in the nineties when the velodrome was built. A few years later Chris Hoy won gold in the individual time trial in the velodrome and from there British Cycling took off. "They've turned into the most successful sporting machine anywhere in the world," argues Sir Richard.

"There were riders who were inspired by the Commonwealth Games," points out Alex Scoular, a regional development manager with British Cycling. "Like Jason Kenny, who got involved with Eastlands, a club for young people in the [Manchester] velodrome. He joined that club in the early 2000s and at Beijing he was a gold medallist."

Scoular, who works to support clubs for young cyclists around the country, is based at the cycling centre. He can wander over to the velodrome and see the elite riders any day he likes. Not that it's restricted to just budding medallists. "If you can ride a bike, you can ride in the velodrome," he says.

"We're getting more clubs and more riders joining up as members of British Cycling." There are 12,000 members who are under 18. At the time of the Games, British Cycling had 15,000 members in total. "So there's more riders. But also the standards at those clubs are rising. It's really positive."

The facilities left behind and the subsequent Olympic gold medals and British winners of the Tour de France - from Vicky Pendleton to Bradley Wiggins and Chris Froome - are concrete legacies of Manchester 2002. More than that, though, the success of the Games - and beforehand the national media were expecting Manchester 2002 to be a disaster (Edinburgh didn't bode well, after all; and maybe there was typical London thinking that the provinces were incapable of doing anything on this scale) - may have re-engendered the city's can-do spirit. "It made Manchester very forward-thinking," reckons Christian.

And it made others think about Manchester in a different way. "There were TV images to a very large audience which showed Manchester not as an old industrial city but as a very modern city. That was very important," says Sir Richard.

Alex Poots, the director of the Manchester International Festival, itself a Commonwealth Games legacy, adds: "It reminded the city of a confidence that they probably had when they were the most productive city in the world in the industrial revolution."

From there, culture and sport have continued to give the city visibility while infrastructure offered new buildings, retail opportunities, homes. That all sounds good, doesn't it? Well yes, but maybe it depends on who's listening.

"Are you OK, Josh? Do you remember the Commonwealth Games?"

"When was it, 2002? I was four."

Maria Gardiner turns to me and smiles while Josh turns back to his mates. We are sitting in the noisy cafe of the Roundhouse, home to Manchester Settlement, the charity of which Gardiner is the chief executive in Higher Openshaw, about a mile further from the city centre than Beswick. The charity has been around since the 19th century and seeks to address poverty. Since Gardiner started here in 2002, the emphasis has been on helping young people.

"We're now running a school," she explains, "as part of the pupil referral unit. But we do it differently from anybody else because, rather than a pupil referral unit being a sort of exclusion, we involve the young people in the community and it really works. We work with kids under 16, kids over 16 who are leaving care and are in supported housing to get on their feet and live independently."

There are many other strands to the charity's work but young people are key. They're Manchester's real legacy, Gardiner points out. She is positive about the Games. In a way the fact the charity's building is where it is rather than Beswick is a reflection of the investment that's been made a mile down the road. Some of that investment is reaching Higher Openshaw too. Just down the road from the Roundhouse, a newish supermarket has Dead Blow - a 15-tonne sculpture by Robert Erskine representing a steam hammer - out front, a reminder of what the area used to be known for. Regeneration continues to edge forward.

But there's a but. We are living in a post-austerity age. Cuts are beginning to impact the community Gardiner works in and she's worried about the future.

"There are a lot of people who are really struggling. Since the cuts there's people who can't access the right advice or guidance. Some of the measures that have been introduced … I know there's not a bottomless pit. But you have to help people. The benefits are immediately stopped. If they've got a family, what are they supposed to live on?

"It's impacting communities like this and it's impacting on children and young people. It's OK looking at the pounds, shillings and pence of the cuts but it's the long-term effects. We have kids coming here after school that don't have a hot meal so we have to start feeding them."

You can already see symptoms of neglect creeping in, she says. Rubbish piling up. Untended public spaces. Her fear is that all the good work that's come in the wake of the Games is in danger of disappearing and it will play out in the lives of the teenagers around us.

"Once they get down the line of disengagement and feeling that there's no world for them, that's going to have a knock-on effect for the rest of their lives."

The cuts may be having a more visible impact too. "When they built the new pool for the Commonwealth Games and the council was adamant it would not affect local pool services, I remember being sceptical," Dave Haslam tells me a couple of days after my visit to the Roundhouse. "But it didn't affect local pool services until the recession hit. We're now in a situation where lot of local swimming baths are being closed because of the cuts and I'm not sure that would have had to have happened if they didn't have the big facility to maintain."

"It is our best-used swimming pool," Sir Richard points out, "and it is our cheapest-to-operate swimming pool. And we can still hold national and international swimming events there."

Haslam worries, though, that there is a danger other areas of the Commonwealth legacy are under threat. "Until the recession hit we didn't realise how fragile a lot of the regeneration of Manchester had been. Leisure and retail had both been seen as engines of regeneration and those were very vulnerable to the recession, particularly retail. So we have struggled in the last few years to maintain our progress. In fact, I don't think we have really and I think the other thing is we've probably realised that the model that regeneration is built on - retail and leisure - might not help us going forward, that there does need to be a few other ingredients involved in the process.

"I think the city's in a good place, but we have empty apartment buildings and we have lots of empty shops, as in every other city in the country. You don't have to go far to find people into second- or third-generation mass unemployment."

In the Cornerhouse - Manchester's equivalent to the Glasgow Film Theatre - on the edge of the city's student area, I meet Camilla Lewis, a research associate with the Centre For Research On Socio-cultural Change at Manchester University. In 2010, for her PhD she spent a year living in Beswick to investigate ideas of community in the area close to the Sport City complex, during which she found, she says, a "real sense of uncertainty about the future".

"There isn't a simple story about east Manchester regeneration being negative. Rather what people were saying was that there had been many positive changes; things like transport, green spaces, new shops, while at the same time there is this overwhelming sense of uncertainty about the future and that came down to unemployment. People were saying that even though we've got these amazing new houses and facilities there is still a high percentage of people unemployed and people are very concerned about how their family can support itself in east Manchester."

And there is a sense of disconnection from the brave new world envisioned by the council. Regeneration means rebuilding, and that means knocking things down. "It was very noticeable that some of the key places Mancunians feel are very important are disappearing - local markets and pubs are being taken over and I think that's an important part of the story, that we don't see this regeneration of Manchester as a linear process, that there are alternative versions of what that means."

The distance between Beswick and the city centre is not huge geographically but maybe mentally there is a gap to bridge. Financially too. Lewis tells me a story about a disabled woman who, because of the construction of a new slip road, has to take a taxi to Asda so she can do her shopping. "She was saying it's added £1.50 to her travel twice a week. She keeps going to these public meetings and explaining this and the planners look at her as if she's crazy: £1.50 means nothing to them."

Ask Sir Richard Lees about what he hasn't managed to change in Manchester and he says: "I think it's more a question it hasn't happened yet. Probably because of the recession and in particular the housing crash in 2008 and the changing government, and of them scrapping the housing market renewal fund, we are not as far on in housing development - particularly in east Manchester - as we would want to be, but again that means it's happened more slowly, it's still going to happen. It is happening."

Sir Richard is an optimist. Maybe that's the inevitable corollary of a can-do spirit. But Manchester, he says, despite the economy, is still moving forward.

"Over the last census period our population went up by 19% which made us the most rapidly growing city in the UK. But it's also young people. Our population over 65 went down over that period. Our big increases were zero to five and the biggest was 25 to 29, so we are becoming a very much younger city fuelled by increasing economic activity. For young, economically-active people with disposable income there's probably not a better place to be.

"The recession has had an impact, there's no question about that, but as I often say about Manchester City Football Club, it has just slowed our inevitable rise to world domination."

Where Manchester goes first, will Glasgow follow? I guess we'll know in 2026. n