BUSINESS leaders have given a cautious welcome to plans to bridge the North-South divide.

Deputy Prime Minister John Prescott was on Tyneside yesterday to unveil The Northern Way - the growth strategy the Government hopes will address the productivity gulf that separates the regions.

The investment outlined included £100m allocated through regional development agency One NorthEast to deal with skill shortages and improve transport.

Among the spending commitments for the next three years will be £5m for a design centre on the Baltic Business Park in Gateshead, and £3m towards the National Industrial Biotechnology Facility at the Wilton Centre, on Teesside.

Speaking at the launch at Gateshead's Hilton Hotel, Mr Prescott highlighted the regeneration of The Quayside area as an example of what could be done.

He said: "By working with our regional partners, I want to see us build on our assets and successes and look at how the North becomes more prosperous, more competitive and more dynamic.

"By getting architects, town planners and developers to work together, we have already created a "wow factor" in the North, for example, the fantastic regeneration of the Quayside in Newcastle and Gateshead is world class."

Yesterday, the business community said it had backed the project from the start, but reserved judgement until the fine detail had emerged.

The North East Chamber of Commerce also suggested that the £100m budget was modest, given the scale of the problem it was expected to deal with - and, in particular, was "dwarfed" by the £30bn productivity gap between the North and South.

Chief executive George Cowcher, said: "The figures speak for themselves - we are lagging behind the South. The gauntlet was thrown down and the Northern Way is our champion.

"With any initiative, the devil is in the detail. The publication of the business plan gives us the detail and we will take a long, hard look at it to see whether or not this is the right champion.

"One thing we will be looking for is additionality - we want to see what the Northern Way offers that is radically different from the initiatives currently carried out by the three regional development agencies."