THE North-East and North Yorkshire has been chosen to pilot a scheme designed to stop small firms going under during tough times.

In the ground-breaking project, launched yesterday, business advisors will go into small companies suffering from short-term financial difficulties and put together a rescue package on their behalf.

They will assess the business on behalf of creditors and then advise on the long-term management of debt.

The rescue scheme, to be operated by the Small Business Service (SBS), was devised partly in response to a joint report by the Treasury and the Department of Trade and Industry, published last year, that called for greater flexibility for firms facing problems.

SBS head David Irwin said: "I want to change the way the business community behaves towards small firms that experience a cash-flow crisis.

"Too often, the liquidators are called in to viable firms due to short-term problems that can be solved. As a result, jobs and livelihoods are lost and the potential that the businesses had to generate wealth is gone."

The pilot scheme will run in Newcastle, North Yorkshire, Manchester, Dorset, Hampshire, the Isle of Wight, Leicestershire, Nottingham, the West Midlands and the east of England for between six and 12 months.

The SBS has allocated £125,000 to cover the cost of the project.

Specialists, including Business Link advisors and recovery experts, will be involved in the scheme.