Sector: Lower Medium Price: £20,245-£31,730 Fuel: 35.3–83.1mpg CO2: 89–188g/km

It’s a little under four years since BMW launched the second-generation 1 Series, which says a lot about how much that sector has moved on in the meantime. Audi has its broadest-ever A3 range, Mercedes-Benz and Volvo now have credible rivals, and the CT 200h is looking sharper than ever too.

So this refreshed version has, sensibly, taken cues from BMW’s sportiest small cars, and looks like a hatchback version of the 2 Series Coupe. It’s made this much easier to love for its styling, even if the elongated rear lamps are an odd fit across the tailgate from some angles.

BMW is taking steps to simplify its dizzying choice of variants, and the new range is much easier to navigate through. So the big-selling Sport and M-Sport versions are retained, while the entry-level ES and design-led Urban trims were dropped in line with British buying habits. Most customers had come in at the SE trim beforehand, which is now the entry point.

Only a third of UK volume goes to fleets, but the equipment range is tailored to suit business users. All cars get satellite navigation through the 6.5-inch fixed display on the dashboard top, as well as climate control, Bluetooth and digital radio. There is also a multitude of internet-connected functions which can be added as an optional extra, including calendar connectivity, music streaming and downloadable applications.

Also good for fleets is the all-new diesel line-up, which is now a step ahead of rivals. It means the 118d, at the core of the range, now dips under 100g/km for the first time while offering respectable mid-range performance of 148bhp. The 188bhp 120d emits less than 120g/km even with xDrive four-wheel drive, and the 221bhp 125d returns over 61mpg.

Not that any feel like a poor choice. The 1 Series inherits that same feeling of balance and stability as larger BMWs, with perfectly weighted controls, an excellent driving position and plenty of grip. It has a proven record for real-world efficiency, too, helped by the selectable drive modes.

But the star of the range is the new 116d. BMW, once known for its inline six-cylinder engines, has just equipped its smallest model with the same three-cylinder 1.5-litre turbodiesel as used in the new MINI Cooper D. It produces 115bhp and a surprisingly wide power band, accompanied by the appealing off-beat growl of a three-cylinder engine while under load, yet it’s almost inaudible while cruising.

This makes great sense from a business point of view, too. The 116d isn’t offered in either of the sporty trims, but the eco-focused ED Plus version returns 83.1mpg and emits 89g/km CO2 – a joint segment lead with the forthcoming A3 ultra. The only downside of its pursuit of efficiency is its stiffer, lower suspension setup to reduce drag also makes a marked difference to ride comfort. Sport versions ride better, despite the larger wheels.

Otherwise, it’s only interior space which lets it down.  For now, BMW is unique in this sector – at least until the 1 Series follows the lead of the brand's MPVs – in that this is rear-wheel drive. The compromise for its resulting balance and driver focus is a cramped rear bench and smaller boot space than the A3 or A-Class.

But neither has put a growing number of buyers off its predecessor, despite the surge in competitors that it now faces. Fresh design and fiercely competitive running costs mean it looks, as well as performs, like its bigger siblings. They’re factors which are likely to find plenty more conquest buyers in one of BMW’s largest global markets.

Verdict:

Class-leading mpg, 2 Series design cues and fresh technology put BMW back at the head of a competitive pack. At least for now.