I have seen sites which claim it is Wells in Somerset, but I've always believed it to be St. David's in Wales which consists of a cathedral and a car park basically. It has a population of 1600. Wells has a population of around 10,000. http://www.stdavids.gov.uk/
In the UK, a place can usually only be a city if it has a cathedral or if it granted city status by the queen (or king). Newport was granted city status in 2002 for the Golden Jubilee. We've had a cathedral for ages, but it still took royal approval for us to officially be a city. We view city status a little differently over here.
Actually, contrary to popular belief, the cathedral is irrelevant to a UK city having city status. Not only are there cities without cathedrals (e.g. Bath, Hull, Nottingham, Cambridge, Southampton, Lancaster), but there are mere towns with a cathedral (e.g. Chelmsford, Blackburn, Guildford] and even a village with one (Southwell).
It's the charter alone that makes a city a city rather than a town.
Wikipedia agrees that cathedral towns are possible and it takes a royal charter to create a city. However, St. Davd's in Wales was granted city status in 1995 making it the smallest city in the UK. https://en.wikipedia.org/wiki/City_status_in_the_United_Kingdom
The City of London is the smallest city in terms of size, hence its nickname of "The Square Mile". The urban area that most people call London actually has two cities within it, the City of London and the City of Westminster. The latter along with many urban boroughs form Greater London while the City of London to a greater extent is an independent enclave with its own local government system and police force.
In terms of population St David's in Wales is the smallest city.
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