North-East business is "innovative and upbeat", according to one of the most powerful economists in the country.

Despite widespread manufacturing job losses, the region has become a success story in other areas, said Marian Bell, one of four external members of the influential Bank of England monetary policy committee.

Ms Bell, who has a casting vote on the level at which interest rates are set, spoke at the end of a two-day visit to the region - her first official trip to the area since her appointment.

Speaking at Filtronic in Newton Aycliffe, County Durham, she said: "I am very encouraged. I think the North-East historically has not had a very easy time but there are signs now of outperformance of other regions with unemployment rates coming down and business confidence picking up. The North-South gap is narrowing."

The granddaughter of a miner from Chopwell, Gateshead, Ms Bell said the image of the region had also improved. "I remember living in the North-East and Consett being a dark and smelly steel town," said the 45-year-old mother-of-two who spent the first five years of her life in Rowlands Gill. "Now, they have a very good employment rate, it is a cleaner place and that is good news.

"I can certainly say that the area is changing."

The biggest change that has driven through a sense of confidence in the region's business has been the growth in higher value added products.

Ms Bell added: "Some people are experiencing weak export demand but businesses that are consumer-facing are doing rather better.

"The news for me has been pockets of strength where I had not expected it.

"The impressive thing I have found in most companies has not just been that the products have been innovative but there has been quite innovative management."

Ms Bell will now take the views of the 70 firms she met during her visit back to the monetary policy committee in London.