Fears that feuding North-east super-council is stifling investment in the region

Tensions among amalgamated local authorities are putting growth – plus Government plans and funding – at risk

Ross Smith of the North East Chamber of Commerce: ‘There’s frustration that things haven’t happened quicker’ (Mark Pinder)

It is one of the most famous and bitterly fought civic battles in the country. Now there are fears that the historic rivalry between Newcastle and Sunderland is holding back the economic progress of the North-east, exposing tensions at the heart of the Government's "super-councils" project.

Local businesspeople warn that councillors are protecting "petty fiefdoms" while ignoring the future of the whole region, as seven councils struggle to work together for the first time. [Last week The Independent on Sunday reported on the nationwide growth of super-councils.]

Founded in April this year, the North-east super-council brings together Durham, Gateshead, Newcastle, North Tyneside, Northumberland, South Tyneside and Sunderland. It is one of five such councils already formed across England and approved by government, with four more in the pipeline. But although the North-east group has been meeting for nine months, there has been slow progress on agreeing a common economic plan.

Greg Stone, a Liberal Democrat councillor in Newcastle, says the historic relationship between the region's cities may be to blame. "It has been a case of 'If Newcastle gets X, we want Y'. I don't think that's always helped Tyne and Wear. There has always been this culture that Newcastle should not be allowed to get too big for its boots. I think that holds the region back," Mr Stone said. "Labour has dominated the North-east but there has been institutional rivalry – not so much between parties but within Labour. This is a big challenge."

When the super-council was first proposed, Sunderland held up negotiations fearing it would not benefit from the arrangement. Once it was established, neither Sunderland nor Newcastle could be seen to be speaking for the other, so Durham council leader Simon Henig was elected leader of the combined authority. However, this set a precedent of voting on decisions – a move that adviser Lord Adonis is understood to have warned against from the outset – which has only served to increase tensions within the group.

The historic political divisions between the communities do not reflect the way local people live, many of whom commute outside their home city for work and leisure. Businesses worry that investment in the region is being stifled by battles fought behind closed doors.

"There is a lot of frustration among our members that things haven't happened quicker," said Ross Smith, director of policy at the North East Chamber of Commerce. "We still see too many things being done at local authority level without a real plan in place to do them at a bigger level."

The seven councils still have separate economic development teams, which leaves prospective investors confused about who to talk to.

"We recognise these things take time, but I think clear communication and a sense that there is a definite timetable in place would build confidence among businesses," Mr Smith said. "There is a lot going for this area, but we have to recognise that it has not performed to its economic potential. If we want to put that right, we have got to be as competitive as we can be. At the moment we're not – and that's going to be even more the case as Scotland's powers develop."

Ed Cox, director of the IPPR North thinktank, said the concerns were six months out of date, as there was a "growing maturity" in the councils' relationship. All combined authorities would face backroom struggles, he said, but the financial benefits of the structure meant that councils were working hard to resolve them. Other civic rivals, including Manchester and Salford, and Portsmouth and Southampton, are also putting their differences aside.

"The crucial thing is that the private sector knows who to talk to in relation to investment and infrastructure. The combined authority means there is somebody to phone. Tensions may have existed and may still exist, but that's not going to get in the way," Mr Cox said.

Paul Woolston, chair of the North East Local Enterprise Partnership, is also positive about the future of the region's super-council. "One of the clear messages that we got from the wider [business] community is that they want it to have a combined authority," he said. "When you create something new, particularly governmental, it takes a while for it to settle down. I would say, if there are criticisms, it's unrealistic to expect them to be flying."

But Mr Stone warned that the super-council would have to improve its record if it was to attract the same funding and powers granted to Manchester by chancellor George Osborne. "There is a lot of power and money being given to combined authorities, but I think [the North-east super-council] needs to show that it can be responsible and effective," he said. "I'm concerned there is still insufficient understanding of the needs of the private sector. We can only have a sustainable public sector and public services if we have a sufficiently successful private sector to earn the money for us to spend."