The city is ranked above Birmingham, Liverpool, Nottingham and Newcastle, in terms of what it offers growing businesses and entrepreneurs.

The findings of the UK Competitiveness Index came as a leading business expert in Leeds said it was in a "very strong position" to ride out the looming recession.

Ian Williams, policy director of the Leeds Chamber of Commerce, said the city's diverse economy would insulate it from the worst of the economic pain.

The UK Competitiveness Index ranks 407 local areas and is compiled by the Centre for International Competitiveness at the University of Wales Institute in Cardiff.

It rates each area on factors such as research and development spending, the workforce's educational qualifications, business start up rates and the number of new businesses per 1,000 inhabitants.

It also looks at the size of each area's "knowledge-based" industry and the economic output per head.

Leeds climbed 10 places in the last two years, making it the 14th best city in the country for business.

A major driver of the city's growth is its highly-skilled workforce, with one in five jobs in the "knowledge-based" industry.

This has led to the highest output per worker in the Yorkshire region.

A forecast on Tuesday from the Organisation for Economic Cooperation and Development (OECD) stated Britain's economy is plunging into recession.

But Mr Williams insisted this is not the case in Leeds.

He told the YEP: "We have 120,000 jobs in business and financial services but it is across a breadth of the sector.

We have call centres, commercial banks, building societies, the legal sector, and accountancy practices.

"The city's economy has changed, but it is diverse and we think that diverse nature is one of the things that will contribute to our continued success."

He said banks are still lending to businesses in Leeds, unlike in London where lending for major deals has all but dried up

And Alasdair Wightman, managing director of digital agency AWA, based in the Round Foundry, Leeds believes the quality of staff available is boosting the city's performance.

He said: "There is a statistic often bandied about that 62 per cent of graduates stay in Leeds.

"There is a bank of bright people coming into our sector. Some of them are dragged down to London but a hell of a lot stay in Leeds."

Mr Wightman said the e-commerce and digital marketing industries are growing, which means companies like his are "almost in a recession proof" position – AWA is expanding from 23 staff to up to 29.

Wakefield jumped 26 places in the league table since 2006.