Scarborough won the European Commission accolade in recognition of its work to encourage people to start up and grow businesses and create jobs.

The resort, already named as the most enterprising place in Britain, was up against European cities including Finland's capital Helsinki, Spain's second biggest port, Valencia and Liege in Belgium.

Scarborough's winning bid was led by the Scarborough Renaissance Partnership, a coalition of local entrepreneurs, council staff and residents, which transformed what was a seaside resort in decline into a thriving enterprise hotspot.

Achievements include stamping out seasonal unemployment, diversifying to grow new industry sectors and attracting more than £200 million of private sector investment.

Business Secretary Lord Mandelson, said: "A strong enterprise culture inspires communities and creates jobs - something which is vital during these uncertain economic times.

"I would like to congratulate the Scarborough Renaissance Partnership on their success and in being recognised not just as the most enterprising place in UK but in Europe."

Tony Peers, leader of the Partnership's Town Team which steers the project, said: "The whole town has embraced the enterprise cause and to be recognised again in this way will really spur us on to become even more enterprising in the future - especially given the current economic climate.

"Coastal towns have traditionally experienced economic challenges so I hope what we've achieved inspires people to see that there is light at the end of the tunnel if entrepreneurs are supported and encouraged."