THE GOVERNMENT'S bid to boost the North-East was branded a failure last night after official figures showed new businesses still preferred to set up in London and the South.

A league table of enterprise - business start-ups per head of population - showed that the seven top areas were all in the capital while the bottom five were in the North-East.

The table, which covers England, Scotland and Wales, shows far more firms registering for VAT in the South than the North.

The seven leading areas for business creation were all in London, headed by the City of London, with 2,893 start-ups per 10,000 residents and the City of Westminster, with 300 start-ups per 10,000 residents.

The bottom five areas were all in the North-East, with Wansbeck in Northumberland having 12 start-ups per 10,000 residents, followed by Redcar and Cleveland with 14 start-ups per 10,000 residents.

The average across the UK was 40, with an average in England of 42. Publishing the table, the Treasury acknowledged: "There are significant differences in business start-up rates across the regions of the UK and within the regions."

However, the Treasury stressed that its figures, while being the "most precise measure" available for new business creation, were far from perfect.

They "may be disproportionately skewed due to special factors" such as the creation of business headquarters in London, it said.

Deputy Prime Minister John Prescott responded by promising to strengthen the role of the eight regional development agencies (RDAs) launched last year by the Government.

Mr Prescott, attending a meeting of RDA chairman in Birmingham with Chancellor Gordon Brown, said the aim was to achieve a "more balanced growth" between the regions.

Tory spokesman for the regions, Tim Loughton, dismissed Mr Prescott's announcement as "tokenism" and said that the RDAs had "comprehensively" failed