Councils urged not to up taxes.

the regional economy by procuring more locally.

"We cannot afford for this deficit to drive councils back to a 'cheap is best' approach to the decision-making process when it comes to procurement. All the evidence clearly shows that the more councils work with local companies, the greater the financial benefit for the local economy," said Mr Smith.

Middlesbrough Council is already gearing up for a series of procurement workshops followed by one-to-one mentoring for companies bidding into the public sector for the first time.

The initiative, which will launch this autumn, follows nearly a year of research into local supply chains, which revealed that many smaller firms believed the public sector bidding process was too complex and time consuming.

The procurement workshops are among a raft of new ideas, including sector specific forums starting with the creative industries, designed to help firms survive and prosper through recession.

BUSINESS leaders have urged councils not to increase the tax burden on local firms as national figures revealed a pounds 4bn hole in local authority finances.

Yesterday, the Local Government Association said a "perfect storm" of falling returns and increased demand on their services would lead to further town hall cuts. Poorly performing investments and falling property prices were largely to blame for councils being pounds 4bn worse off than they were two years ago, the LGA said.

But Ross Smith, head of policy at the North East Chamber of Commerce, said the black hole in funding must not lead to extra pressure on firms.

"Over-burdening businesses with further taxes is not the answer to this problem," he said. "It is more important than ever that local companies are given the space to be successful. Councils have a duty to look at the impact on the wider economy and not just their bottom line."

He urged them instead to support