BUSINESS leaders in the region have backed efforts by Chancellor Gordon Brown to highlight two-tier inequality in Europe that leads to UK business missing out on millions of pounds in EU contracts.

A report commissioned by the Treasury said EU countries discriminated against UK companies in favour of home companies when awarding contracts.

The Chancellor has pledged to tackle the UK's European counterparts over the claims, which it is estimated cost UK companies £1,000bn in public procurement contracts.

George Cowcher, chief executive of the North East Chamber of Commerce, said: "What is the point of having a single market agreement if member countries engineer two-tier inequality? One rule for home firms and another for foreign competitors undermines the entire ethos of a single market.

"The British sense of fair play will always ensure that we abide by the rules - it is time everyone else did likewise.

"Gordon Brown is right to take these concerns to the doorstep of Europe."

A Treasury-commissioned report, by Alan Wood, chief executive of Siemens, has uncovered widespread problems with a single market designed to give all EC member countries a level playing field to compete for work.

Among a number of complaints, Mr Wood discovered contracts were being awarded to national suppliers even when foreign cmpanies offered better quality or price.

It was also claimed that pressure was placed on suppliers to use local sub-contractors and that foreign bids were invited solely to force local businesses to cut prices and that contracts were drawn up to suit national companies.

Mr Brown will raise the findings with EU finance ministers tomorrow in Brussels.

Mr Brown told the BBC: "I'm hoping we will get a series of market investigations (and) that the commission will clamp down on this practice."

He said that contracts were, on average, 30 per cent cheaper when awarded on an open basis.

"What we must do is expose the fact that not enough has been done to open up these markets for public purchasing," he said.