THE state of the North-East's roads is having a serious impact on the regional economy, a survey has claimed.

Despite a Government pledge to spend £180bn on the nation's transport infrastructure by 2010, bosses surveyed by the British Chamber of Commerce (BCC) said conditions had worsened rather than improved.

Nearly 2,000 companies across the country were questioned about Britain's transport system. In the North-East, nearly half the companies who took part said the condition of the region's roads was holding them back.

About 42 per cent said they would have taken on staff and expanded if the region had better road links.

The report said: "Over half of companies report that an inadequate transport system is a deciding influence on where they choose to locate their business, and over two-fifths state that it limits their ability to expand.

"As a consequence, the economic progress of some regions is being limited, so much so that those with poor transport links will find it difficult to attract and retain inward investment."

On average, hold-ups and delays caused by poor roads costs a medium-sized business about £27,000 a year. This costs the UK economy a total of £15bn a year.

David Frost, BCC director general, said: "The reputation of the UK as an accessible nation and a good place to do business is being undermined by our woefully inadequate transport system."

The Highways Agency said work had started on a £520m scheme to upgrade the A1 in North Yorkshire into a three-lane motorway.

The project, which will see more than 50 miles of road upgraded, is the largest road improvement project in the country. Government officials have also approved safety improvements to the A66, although the work will not be completed for several years.

But one of Britain's biggest motoring organisations said last night that more spending was needed.

The RAC Foundation has written to the Government Office North-East and local authorities asking for support in urging central government to think again.

It believes a stretch of the A1 between Chester-le-Street, County Durham, and West Newcastle, should be upgraded to a motorway.

Edmund King, executive director of the RAC Foundation, said: "Upgrading the A1 in the North-East is vital to the economy both locally and nationally. Road-users in the region deserve improvements. We claim to be the fourth largest economy in the world, so surely we can afford a decent road system to support economic growth areas like the North-East."