fDi Magazine's European Cities and Regions of the Future 2010/11 shortlists take more than six months to research and involve the collection of data for 223 cities and 142 regions in Europe.

Councillor Tom Buchanan, Edinburgh's economic development convener, said: "It's a hugely impressive performance that recognises Edinburgh is a world-class capital that really punches above its weight as an investment location.

"We offer one of the UK's most highly skilled and qualified workforces; globally significant expertise in a number of key areas such as enabling technologies, informatics, human and animal life sciences; strong sectoral expertise in areas such as financial services and creative industries; international connectivity; a competitive cost base and a fantastic quality of place and of life."

Alan Johnston, Chair of DEMA (Destination Edinburgh Marketing Alliance) added: "This is a very meaningful award and it speaks volumes that Edinburgh has retained its title. It carries a great deal of weight with those involved in inward investment and relocation and helps to give Edinburgh the edge, providing our business community and the city in general with a competitive advantage. That's especially important in the current climate.

"In terms of reputation, we know that Edinburgh is already recognised as being amongst the best, whether it's to visit, invest, live, work or study in, but to have it verified by such a respected source yet again adds significant strength to the city's confidence."