COMPANIES in the region will be forced to freeze wages and cancel recruitment drives if fuel prices continue to rise, it is claimed.

Business leaders say the high price of fuel is having a disproportionate impact on the area because of the region’s distance to markets.

The Federation of Small Businesses (FSB) has called on the Government to cancel any future duty increases until a “stabiliser” is put in place.

The proposal would freeze or reduce duty to match increases in VAT revenues from higher pump costs.

David Longstaff, a regional organiser for the FSB, said: “The impact for certain sectors, particularly those reliant on transport, is going to be severe.

“Recruitment drives are going to be cancelled and wages frozen as small firms struggle to keep their heads above water.”

Mr Longstaff said ministers should consider scrapping planned duty rises and look at concessions for those who live and work in rural areas.

Mark Stephenson, a policy advisor at the North East Chamber of Commerce (NECC), said the organisation was concerned about the disproportionate impact the rise in fuel duty has on businesses in the North-East He said: “Our businesses already face heavier fuel costs than their counterparts in other regions in order to access common markets, and the rise in fuel duty really will put an extra squeeze on businesses that have already been hit by VAT rises and tough trading conditions.”

Analysis carried out by NECC last year revealed that the cost to bring each tonne of freight in or out of the North- East generated 18 per cent more fuel tax than the UK average.

Mr Stephenson said: “A rise in already high transportation costs really does represent an added cost pressure bearing down on North- East businesses.

“Many hauliers in NECC membership have no choice but to pass a proportion of these costs on to customers – the vast majority of whom tend to be based in the region, so this really does hit businesses here harder than most.