A QUARTER of small firms in the North-East claim road congestion has a serious impact upon their business - leading to lost man-hours and increased costs, according to the Small Business Watch survey by Yellow Pages.

More than 80 per cent of companies that transport goods to customers in the UK and Europe believe roads are still the most important mode of transport for their business.

But 65 per cent of firms surveyed in the region say major upgrades are now necessary to combat increased traffic levels.

The Small Business Watch findings, from a poll of 1,500 small firms nationwide, reflect strong concerns over local government initiatives to reduce congestion and improve travel efficiency in the UK.

The survey indicates half of all companies in the North-East believe that new workplace parking levies, a tax on workers who use company car parks, will be damaging, due to increased business costs from meeting new regulations.

And more than a third of companies assert that new congestion charging zones - the payment of a daily toll to enter a city centre - could lead to increases in delivery costs, a drop in staff retention and business opportunities.

It also reveals that 62 per cent of firms believe that re-investment in rail and other public transport systems is the best solution to encourage motorists to leave their cars at home and ease inner-city traffic congestion.

Inadequate rail and bus services mean that many company employees have no alternative but to drive to work. Only a quarter of respondents now use public transport to get to work and a mere four per cent use trains or buses for business travel.