It's the city that never sleeps. It has hip clubs, Michelin-starred restaurants and - heavens - a soon-to-open Harvey Nicks. The city is Leeds. Southern style snobs prepare to be surprised
here's a small exercise for narrow-minded Southerners: say the word "Leeds" to yourself and see what comes to mind. It might well be grim Fifties office blocks, motorways overwhelming a city centre, pubs with cheap carpets and cold nights punctuated by the sound of breaking bottles. If so, you obviously haven't been there lately.

A couple of years ago, when Leeds council announced an initiative to become a "24-Hour City", the Milan of the North, snobby regionalists had plenty to scoff at, while the news that Harvey Nichols, the grande dame of fashion retailing, had chosen Leeds as the location for its first store outside the capital merely provides further opportunity for mirth. It is time the nation, and particularly the South, was let in on a secret: Leeds is on the up and up.

Even a short walk around the city centre demonstrates that the phrase "urban renewal", so often an empty prom-ise of quangos that achieve nothing more substantial than a glossy factpack, can scarcely have been more appropriate. The Victoria Quarter, a series of elegant 19th-century arcades, rather like those off Piccadilly, is a veritable emporium of cosmopolitanism: a large kiosk with baguettes, bagels, ciabatta and giant crusty loaves, a florist with designer twigs and vast dried flowers, and an outlet satisfying the new British obsession with candles. Tables are laid out, waiting for warmer weather and Leeds cafe society to swing.

For the style conscious, Jigsaw, Kookai and Ted Baker are a stone's throw apart, whilst elsewhere there are around a dozen designer shops catering for the young and hip or the mature and the stylish. It's glam up north.

The city is blessed with three restaurants with Michelin ratings (Leodis, Rascasse and Pool Court), nightclubs that are among the best in the country according to style and dance magazines, and new cafes and bars, typified by stripped wood and strong coffee, opening by the month. Harvey Nichols will merely be a jewel in the crown, locals say. There is an almost tangible confidence about the place.

Leeds's turnaround dates back five years, when the rise of club culture and a growing demand for quality in food and clothing were complemented by the council's initiative in regenerating the city. Under the leadership of Jon Trickett, who recently won the Hemsworth by-election and seems to have personified New Labour before the term was invented, a partnership of private and public sectors set about redeveloping the centre, chiefly by encouraging nightlife and removing as much traffic as possible. And while it is easy to raise an eyebrow at the idea of a vibrant cafe society in a cold northern town, it is amaz- ing how far a little municipal imagination goes.

"The council have been brilliant - helped us every step of the way," says Dave Beer, promoter of the Back to Basics club night and shareholder in its venue, the Pleasure Rooms, which draws clubbers from all over the country. "The whole city used to be on the streets at 2am but we've been given a licence till six. People are going out at more Mediterranean times, they can go out at 1am and still have five hours. I know some people said it was nonsense, but Leeds will be a proper cosmopolitan city, though it won't happen overnight."

A procession of top DJs and a typically northern up-for-it atmosphere at the Pleasure Rooms has played a significant role in making Leeds the most popular destination for students for the past two years, along with the growing academic reputation of the city's universities. On a recent Wednesday evening it was a struggle to find someone who wasn't a student from north London, intending to work in the media and wearing a designer item of some description.

"Leeds has got a reputation for being the happening place, it was the only place I wanted to come," says Clare, a 19-year-old first year studying sociology, shopping and clubbing. "I like the way it's a young people's ghetto and it's small and easy to get around. London is just too big sometimes. And the Victoria Quarter is great, I shop more here than in London." And how did she afford that Dolce & Gabbana top? "It's a fake from Hong Kong," she explains, though her friend Ingrid splashed out pounds 70 on her Nicholas Deakin lace-up boots. "They were in the sale," she apologises. "But don't tell my parents."

If Leeds has more than its fair share of students whose parents will indulge them in Issey Miyake for the freshers' ball, those with less income will assuredly dispose of every penny in a manner that contributes to the city's social resurgence.

Indeed, Leeds enjoys a confluence of types prone to spend their money stylishly: students, football and rugby players and their wives, businessmen, solicitors and accountants. Aside from London, Leeds is the nation's biggest financial and legal services centre, while the lack of a heavy industry upon which the majority of livelihoods depended, such as Sheffield's steel, meant it rode the recession more easily than its rivals and became the strongest local economy in the country. Largely perhaps because of its long-established Jewish community, the city has a tradition of entrepreneurship and small business that is particularly suited to a post-industrial economy.

It is perhaps not surprising that the original home of Burton and Marks & Spencer should still have a regard for quality clothing. "I am often surprised in London clubs how they just wear Lycra, or don't make an effort at all," says Dawn Stretton, a local-born clubwear designer who has a shop in the Corn Exchange, a vast Victorian dome that has been impressively converted into a trendy souk of independent retailers and designers. "In Leeds they want to dress up. They like a quite plain, strong look, they know what they want, but there's nothing garish about it."

The Leeds ladies-who-lunch do much of their shopping at Room 7 in the affluent suburb of Roundhay. "People are more fashion conscious in Leeds than London," says the manageress, Jill Adams. "And here they can get to know us, which is hard to do there. In London they might not bother with you if you don't look right when you walk in. We have girls who save for a month for Patrick Cox shoes and women who save for a Herve Leger suit at pounds 1,600. There is disposable income, and people will spend but they are very careful about what they buy."

As a local she can remember Leeds before the boom. "It was so boring, I was going to London whenever possible. But now I have friends from London who come up here for a weekend. I can even quite happily go out in Headingley for a night, there's two cinemas and some nice restaurants." Incroyable.

Rod Hardman, regional manager of Flannels, a designer retailer with 18 shops in the North, thinks Harvey Nichols may struggle for staff. "A Yorkshireman needs excellent service to bring a few thousand pounds out of his pocket. But he does like his labels."

For Leeds homme, Armani, Stone Island, Ralph Lauren, Calvin Klein and Dolce & Gabbana are essentials. "We get a wide range of people in here, from solicitors to manual labourers. For ordinary lads, if they can't afford a Rolls Royce but can afford an pounds 80 shirt, in their minds the guy with the Rolls isn't any better."

If the young dress for the clubs and self-esteem, the older generation put on the style for the chic restaurants which have sprung up. At Leodis - the roman name for Leeds - women who are clearly not too busy for an afternoon in the hairdressers wear smart suits of lilac, black and grey, while their men opt for dark, well-cut suits, though a few golfing jumpers let the side down.

"Five years ago eating out in Leeds meant a Chinese or an Indian. It is now a confident, more adventurous city with a lot of wealth in the peripheral areas," says the owner, Philip Richardson. Though Leeds' population is only 720,000 its situation, at the junction of the M62 and M1, provides easy access from the rich valleys and small towns around. Richardson's food is modish but unpretentious Anglo-French, and good value. The conversion of a Victorian old mill, retaining original features and brickwork but adding flamboyant modern touches, is typical of the renovation of the city.

A short walk along the river is Rascasse, a giant restaurant in an old granary warehouse, which co-owner Nigel Joliffe admits was influenced by Sir Terence Conran's London eateries. "People have come here and said this could be London, which flatters some and not others, but it indicates that insularity is over. People here spend a lot of time in London, which is only two-and-a-half hours on the train, they travel abroad a lot, their tastes have developed. They are cosmopolitan, they are not aghast when they see white truffle oil on a menu," he says. "There is not the shame in success in Leeds that perhaps Liverpool struggles with. Profit is not a difficult concept here."

The success story is set to continue. Next month the Queen will open the pounds 42 million Royal Armouries Museum, while Harvey Nichols pounds 5 million, four-floor store opens its doors in October, and many existing businesses have plans to expand and others to relocate.

The smallness alone of Leeds and other regional cities compared to London means that in fashion, food and nightlife the capital will always tend to think of things first, and more often than not do them best. But there is an optimism about Leeds that the big smoke hasn't felt since the Eighties boom, and it's less offensive, less piranha-like at that. You know the saying: if you're tired of Leeds, you're tired of life.

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