Birmingham has been ousted by Manchester as the best city in the country after London to locate a business.

The annual Cushman & Wakefield UK Cities Monitor, which reports the views of chief executives from 200 leading companies, saw Manchester powering ahead in a number of categories including availability of office space and value for money.

Britain's bosses rated Birmingham poorly on quality of life issues, placing it in 12th place out of 15 cities in the monitor. Manchester was deemed to have the third best quality of life behind Edinburgh and Bristol.

The highest office rents outside of London held Birmingham back, as did higher wage costs than Manchester.

But Birmingham is regarded as one of the best connected cities in the country and the best place apart from Manchester to locate back office functions.

Contrary to the commonly held belief locally that traffic congestion and poor rail services are holding Birmingham back, UK chief executives regard the city's external transport links as the best in the country - ahead even of London.

The survey, published yesterday, places London as the top business city overall followed by Manchester, Birmingham, Bristol, Leeds and Glasgow.

The monitor notes: "Birmingham has fallen in the rankings for both the availability and the cost of offices, reflecting the shortage of good quality accommodation and a possible contributory factor to its fall in the ranking of best city for a new headquarters."

Dropping to third spot will be a setback for Birmingham City Council leader Mike Whitby, who has regularly mentioned Cushman & Wakefield's second-place ranking during speeches. He described the latest report as showing that Birmingham was a "victim of its own success".

However, Cushman & Wakefield stressed that Birmingham remained firmly in the top three, albeit behind Manchester and London. The company said Birmingham was part of a "leading pack" of cities sharply ahead of Bristol, Leeds, Glasgow and Newcastle.

There was also an admission that the survey has little scientific merit since it relies on the "perception" of chief executives rather than hard data.

The monitor ranks cities according to factors such as quality of life, ease of recruiting quality staff, cost of staff, freedom from pollution, retail and leisure facilities, access to markets, internal and external transport links, value for money of office space and car parking facilities.

Adrian Hill, head of business space at Cushman & Wakefield said: "It's clear that senior directors of UK companies overwhelmingly favour the country's three largest cities principally because of their population, access to markets and transport infrastructure.

"The rise of Bristol, Glasgow and Edinburgh however show that softer factors such as quality of life are deemed increasingly important for a firm's employees."

Elaine Rossall, head of European business space at Cushman & Wakefield, said a number of cities, including Birmingham, were "jostling for position" below London.

"Most of the cities in our rankings compete with each other to attract business from overseas and relocations of existing UK companies. They are increasingly recognising the need to promote their competitive advantages and to understand the complex ingredients of success to ensure that their location remains competitive," she added.

Coun Whitby (Con Harborne) said: "The real assessment comes from the market place itself, and in many respects we are a victim of our own success. More and more companies want to come to our city and are driving up rental incomes for business.

"We are buoyed by the fact that the level of interest from investors continues to be very strong and confidence in our city remains high."