SMALL businesses in the North-East are optimistic following better than expected results in the last quarter, a survey has found.

The NatWest Quarterly Survey of Small Businesses showed that of those businesses questioned in the region, sales turnover was up on average by as much as 15 per cent on the past quarter.

Average employment and levels of investment had also generally increased.

Small firms in the hotel and restaurant sector are said to be leading the recovery, with 37 per cent reporting an increase in sales.

More than 40 per cent of small businesses said they expected their turnover to be higher in the next quarter.

While the outlook was generally good for many businesses, 20 per cent said red tape remained their biggest problem.

Jeremy Peat, chief economist at NatWest, said: "It is heartening to see such a positive set of responses.

"Though interest rates in the UK appear to be on the turn, rates are likely to remain low by historic standards against a background of low inflationary pressures, and the global economic recovery should provide small businesses with positive opportunities as we head towards 2004."