Edinburgh Council’s development arm has posted its highest profits since the local authority bailed it out to the tune of £62 million six years ago.

Improving property and housing markets have seen arm’s length subsidiary, EDI Group, post a £2.5m pre-tax profit for 2014.

This marks a reversal of the £2.5m loss it made in 2013.

The firm, which shed 50 per cent of its workforce following its bailout, achieved property sales of £13m in 2014, and paid a £3.4m dividend to the council while finishing the year with cash reserves of £7m, according to accounts just lodged at Companies House.

Eric Adair, operations and finance director, said: “It was a good year with a lot of activity.

“The property sector is moving on from the downturn but only slowly and cautiously.”

He said there were signs of an upturn in activity in the capital’s office market, and compared with 2010 to 2012 a “good level of construction activity”.

EDI’s biggest project is India Quay at Edinburgh’s Fountainbridge, the former brewery site, where it is in discussions with financial institutions over a £100m investment in privately-owned and managed rented housing.

EDI is also poised to announce the identity of a European hotel group which will enable it to develop a site in Market Street, within the world heritage area, which has been lying derelict for 50 years.