The research, compiled by independent price comparison site NerdWallet, comes as workers increasingly leave London for other UK cities thanks to the rise in remote working.
Leeds came in first place in the study, climbing three places to the number one spot since the study was last completed in 2019.
Edinburgh came in second place, Birmingham in third, Glasgow in fourth and Manchester in fifth. Leeds also had the second highest business survival rate and the second largest active business population.
Channel 4 recently announced that it is moving its headquarters to Leeds and major employers, such as the BBC and the UK Civil Service, are also moving key operations to cities outside the UK capital.
Nic Redfern, finance director at NerdWallet, said: “It is fantastic to see so many in Britain starting their own business despite the challenges posed by supply chains and Covid-19.
"As we build back from the pandemic it is essential that we do more to support new start ups in key UK cities such as Leeds to help unlock more of their economic potential.
"Outside London, Leeds is one of the leading UK cities for financial and legal services, but its economy is diverse with retail, manufacturing, and creative and digital industries also playing an important role."
The research follows record growth in startups. There were more new businesses created between April and June than in any other second quarter on record.
Scoring the UK’s largest cities (outside London) on how friendly they are for startups, NerdWallet’s researchers analysed the latest data from Government and business sources, including from the Office for National Statistics (ONS).
The researchers looked at key datasets on each city’s business survival rates, the size of its active business population, average rental costs in each city, population sizes, average monthly pay in each area and the levels of education among the local workforce.
Highlighting the economic potential of cities outside the UK capital, the new research follows the recent Westminster Cabinet reshuffle and renewed UK Government messaging on ‘levelling up’ to spread prosperity across the country.