COMPANIES in the North-East have bucked the national economic trend of major falls in profitability.

While firms all over the UK suffer from the worst economic decline in more than a decade, business in the North saw their profitability - measured by return on capital - rise by 1.5 per cent in the 12 months leading up to December last year, growing to 17.4 per cent.

In contrast, across the economy as a whole, the average return on capital - a leading measure of profitability - fell from 11.84 to 11.18 per cent. Some sectors have seen profitability fall by 15 to 20 per cent

Revealed in a Corporate Health Check by business analyst Experian, the figures point to a region shaking off an economic hangover.

However, while headline-grabbing centres of high productivity, such as Nissan, on Wearside, help to push back the boundaries of efficiency, the report shows there are not enough big firms in the region to alleviate unemployment.

Author, Peter Brooker, said: "By the end of last year, the British economy was showing signs of slipping into recession.

"However, companies in the North-East have managed to withstand everything being thrown at them by raising productivity well in excess of the national average.

"It is unfortunate therefore, that there simply aren't enough large companies in the region to support the total workforce. This is why the region still suffers from widespread financial deprivation."

Mr Brooker said that, nationally, the strong pound was still having an adverse affect on profits, with additional pressure coming from new leglislastion covering issues such as working hours, the national minimum wage and working families tax credit.

"Not only do UK firms have to cope with the continued loss of international competitiveness as a result of the strength of the pound against the euro, and its weakness against the US dollar, but exports outside the EU have also fallen."

The hardest-hit sector has been the media, with a decline in profitability of nearly a third due to a drop in advertising.

The report says companies in the South-West, Wales, East Anglia and the North-West have suffered the most, with Yorkshire faring badly too.

The period covered by the report does not include the impact of foot-and-mouth disease, which is expected to seriously damage profits in many sectors in the Northern region