Depends on what you mean by city car. Do you mean the best car in the 'city car' class?, i.e, smaller than a supermini (Fiesta, Polo, Corsa etc), or do you just mean the best car for use in the city?. The two options could almost certainly overlap, but the latter could easily include cars up to the small family car (Focus, Golf, Astra etc).
As you are looking for economy, the smallest and, more importantly, lightest car is most suitable. So that does really point towards the city car class, think Citroen C1/Peugeot 108/Toyota Aygo, Suzuki Celerio, Kia Picanto, Hyundai i10 and Suzuki Ignis. IMO, your best bet for the money would be the Suzuki Ignis for its combination of very small footprint, very impressive interior space, lightness, and also being quite tall. Very reliable and very nippy thanks to the low weight and 89bhp 1.2.
But I'm pretty sure from looking them up in a previous post, you can get into a brand new Kia Picanto for around £10k, though I think that may be some kind of scrappage deal where you'd need something to trade in.
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