Robert Carlyle has a lot to answer for.

Back in the late 1990s, the Scottish actor's back was being heavily slapped for his portrayal of an out of work steelworker turned stripper.

However, while The Full Monty had critics falling over themselves and the public queueing up at cinemas in droves, those who were just embarking on ambitious plans to transform Sheffield's fortunes quickly learnt that not all publicity was good publicity.

The film, set in South Yorkshire, might have done wonders for sales of Hot Chocolate's back catalogue but it only served to reinforce the city's image as a forgotten industrial wasteland whose biggest export was a dry sense of humour.

"It got the city noticed, but as soon as it was released it was already out of date," says Nigel Tomlinson, chief executive of the city's Chamber of Commerce. "It took a long time to get that grim up north image out of people's heads and there's still some work to do. Perhaps ironically, it's people in this country who have the most misconceptions of what Sheffield is like. When they actually come to the city you can see genuine surprise spread across their faces."

While vested interests have long talked about how much Sheffield has changed, throwing in phrases like vibrant cultural quarter and thriving creative industries sector, many outside the county have not been convinced. However, following the results of some weighty academic research, if the city's champions can be heard muttering, "I told you so", it's with good reason.

The London School of Economics has been charting the progress of Sheffield and six other European cities, including Bilbao and Turin, which 20 years ago were on the brink of collapse following the rapid decline of the manufacturing industry, and all seven have engineered "phoenix from the flames" recoveries.

"Sheffield and the other cities have proved far more resilient than many people dared to hope," says Anne Power, professor of social policy at the LSE and author of the report.

"During the 1980s and 90s they lost up to 80 per cent of their manufacturing jobs and this led to polarised neighbourhoods, crumbling city centres and creaking public transport, schools and health care. Their very future was in question.

"However, the blueprint which Sheffield adopted is one that is replicated by the experience of the other cities. They have bid for high-profile sporting and cultural events, they have cleaned squalid streets, they have restored major landmarks and they have successfully learnt how to mix funding from public and private sources."

It was the latter which had long been Sheffield's stumbling block. The rate of economic decline of a city which until the 1970s boasted full employment was remarkable. The global oil crisis started the devastating domino effect, pressure from cheap foreign competition accelerated the slump, and Mrs Thatcher and the privatisation of coal and steel brutally wiped out any remaining hope for the future.

With social and economic wounds still visibly raw, Sheffield was understandably unwilling to embrace the Conservative ethos of private sector involvement and for every one step forward, it seemed the city was destined to take two back. Meadowhall was an impressive flagship development when it opened in 1990, but it also poached shoppers from a city centre struggling to keep its head above water. The World Student Games the following year were an organisational success, but came at a huge financial cost, and early plans for a Supertram quickly ran out of money.

Despite the setbacks, the ambition remained and 1997 proved to be the turning point. Celebrating its landslide election victory, New Labour promised to make good on promises that things could only get better, Sir Bob Kerslake became the new chief executive of Sheffield City Council and after more than a decade of finger pointing, a quieter more gentler way of doing things emerged.

"Sheffield was late out of the blocks in terms of getting its act together," says Mr Tomlinson, who around the same time returned to his home city after a spell working in the States and the Middle East. "It took a long time, but eventually there was a collective realisation that we didn't need to compete with Leeds, that we had to discover our own objectives and shape our own destiny. Previously there had been a tendency to do things through megaphone diplomacy, but finally there seemed to be a consensus that it was better to sort out disagreements behind closed doors."

Sir Bob, who is name-checked in the report, stepped down earlier this year, but his contribution to Sheffield's regeneration is a visible one. The improved entrance to the station, the revamped retail environment and the return of City Hall to its former glory all stand as testament to a little over 10 years of hard work and a refusal to take no for answer.

Before he left to spearhead the Government's ambitious housebuilding programme, Sir Bob reflected on his time in the city. He admitted the outward signs of renewal were those which drew public attention, but for him Sheffield's greatest achievement was much less tangible. "We've seen renewal of our city centre, tremendous work in our neighbourhoods, investment in schools, the economy really reviving and, in particular, a strong sense of purpose and direction in the city," he said. "But one thing I feel most pleased about is the return of confidence to Sheffield, it feels like a city that's going places."

In more recent years, it's the likes of rock band the Arctic Monkeys who have become figureheads for 21st-century Sheffield, helping perhaps at last to bury the "grim up north" connotations. But while Sheffield appears in a prime position to build on its recent success, its future is by no means guaranteed and the LSE highlights a worrying dependence on European funding and grants, many of which are about to dry up.

"Diversification is key; we must never again get into the position when all of our eggs are in one basket," adds Mr Tomlinson. "Hopefully those foundations are in place. We still have an active steel industry, but we also have thriving advanced manufact-uring, creative industries
and professional legal services sectors.

"There was a time when many of our graduates felt they had no choice but to head to London and I don't think that's true any more. Keeping their expertise and ploughing it back into the economy has to be central to our future, but I do believe that a corner has been turned.

"Last year we had a rough time because of the floods, but we came through it; 10 years ago I'm not sure we would have done. Two weeks after the downpours I was in Istanbul for the World Chamber of Commerce of Awards. For the first time in history Sheffield had been nominated and when I switched on the television in the hotel room there was a
report about how 25 per cent of the new Boeing 787 had
been designed and made in Sheffield.

"At that point I thought 'that's it, we've done it'."

It's the kind of happy ending few would have predicted the year Carlyle put Sheffield on the map for all the wrong reasons.