ALMOST three quarters of entrepreneurs in the North-East expect the growth of their businesses to be affected by red tape over the next three years, research has revealed.

Seventy-four per cent of owners of small and medium-sized enterprises (SMEs) in the region expect progress to be affected by bureacuracy, which they expect to become more burdensome by 2010.

Fifty six per cent of businesses say the need to comply with regulations and legislation prevents them from maximising their performance.

The findings, compiled by Bank of Scotland Business Banking, are backed by recent comments from Richard Lambert, director-general of the Confederation of British Industry, who said that "red tape and regulation only serve to dampen entrepreneurial flair".

The Bank of Scotland research coincides with findings from the company's Small Business Confidence Index, which found that confidence amongst entrepreneurs in the North-East slipped by one point, from 46 to 45 during the last quarter.

Despite the drop, the region remains more confident than the national average, which dropped two points.

The research found that views varied more by location than sector, with only small businesses in the South-East and the East Midlands witnessing a rise in confidence.

Mark Curran, head of Bank of Scotland Business Banking, said: "While the index score has dipped over the last quarter, confidence amongst small business owners is still strong, particularly when it comes to assessing their own growth prospects.

"The majority of small business owners are still working at near to full capacity, with a strong demand for services from their customers."

He said red tape was a concern, adding: "It is worrying to see that, despite demonstrating such strong self-belief, so many of these businesses continue to feel the pressure of regulation compliance."