PRIVATE transport firms will soon reach breaking point unless the Government takes action to halt rocketing fuel costs, the head of a North-East taxi and coach firm has warned.

New research by finance specialist Bibby Financial Services has revealed the region's 139,000 small and medium-sized businesses are collectively paying almost 3m more on fuel today compared to a year ago, as the average price of a gallon of fuel has risen from £5.50 to £6.31.

Andrew Scott, 44, transport manager of Stanley Travel of Stanley, County Durham reckons his business is facing its most challenging period since it was founded by his father Robert 50 years ago.

The firm, which employs up to 100 people and runs a fleet of 60 vehicles across the region, has seen its petrol and diesel bill leap almost 25 per cent to £110,000 over the past year. Fuel costs now make up more than 40 per cent of its total outgoings.

Plummeting consumer spending power, and pressures on local authorities to cut their costs means that business like Stanley are also facing pressures from their commercial and private clients who are unwilling to bear the burden of fare increases.

Mr Scott has called on the Treasury to offer private hire firms some respite by introducing a rebate scheme, similar to the benefits enjoyed by registered bus and coach services, that would return a percentage of fuel duty to commercial users. "Tax makes up about 50 per cent of the price of fuel," said Mr Scott. "What I would like to see is some form of grant that pays back some of the duty so that we can absorb rising costs.

"We are a well established firm with a strong customer base so Im confident that we will survive, but its a very hard time. We are working twice as hard for half as much money. It's a matter of battening down the hatches and doing your best."

Among Stanley's commercial customers are Durham University, Gateshead College and Newcastle College. The family firm also provides services for schools and community groups via its local authority contracts.

Mr Scott added: "It used to be the case with local authorities that the amount they paid us was linked to inflation. But councils are under such pressure to save money they are demanding we freeze our prices at the rates they were two years ago. In some cases you have to turn them away because it just doesn't add up.

"It also hits our ability to grow. We have had to let a small number of staff go and we are unable to renew our fleet as often as we would like."

The Bibby survey revealed more than half of firms who have been hit by the price rise will pass the extra cost on to the customer. About a quarter have been forced to make cuts in areas of the business and managers are planning to introduce more efficient vehicles.