POOR North-East communities are bucking the national trend by hanging on to their small businesses, according to government figures.

The region's most deprived local authorities have enjoyed a 1.6 per cent rise in the number of new firms, compared to a nationwide fall of 6.3 per cent.

And although the number of companies folding has risen by 1.2 per cent in the region, this record is far better than the massive 16 per cent increase across the UK.

Success stories in the North- East include Wear Valley, where there was a 27.3 per cent rise in the number of VAT registrations between 1997 and 2002, the most recent figures available.

Gateshead (23.4 per cent), South Tyneside (10.5 per cent), Derwentside (four per cent) and Sunderland (1.2 per cent) also recorded increases.

In contrast, the number of new small businesses fell in London (10.2 per cent), Scotland (9.2 per cent), the South- East (7.4 per cent) and Yorkshire and The Humber (0.2 per cent).

Several North-East areas also enjoyed falls in the number of firms folding, including Wear Valley (19.2 per cent), Sedgefield (17.9 per cent), Easington (14.3 per cent) and Derwentside (11.5 per cent).

But there were big rises in other communities, including Middlesbrough (20.6 per cent), Redcar and Cleveland (18.5 per cent), Stockton (17 per cent) and Gateshead (12.1 per cent).

The Liberal Democrats, who produced the figures, claimed small businesses were weighed down by red tape and punishing taxes.

Brian Cotter, the party's small business spokesman, said: "Labour's vision to 'make the UK the best place in the world to start and grow a business' has become little more than a pipe dream."

The Lib Dems have raised eyebrows by pledging to abolish the department for trade and industry altogether, to "set businesses free from government bureaucracy".