YORK had a worse record than all but one of its neighbouring North Yorkshire districts for new business start-ups last year, the Treasury revealed today.

The business "birth rate" in the city was 29 for every 10,000 people, significantly below the England average of 38.6.

It was also beneath the average for North Yorkshire county of 38.4 - with only Scarborough, one of the most deprived parts of the country, having a poorer record in 2001 with a mere 27.8 start-ups per 10,000 population.

But business experts in York question the figures, and argue that in any case two reasons why so few business births are happening in the city is because of its good employment record and a lack of grants

Topping the county's table was Ryedale, where 47.6 new businesses were created. Harrogate came in on 43.5 and Selby on 38.2.

Releasing the figures, Chancellor Gordon Brown pledged new measures to boost enterprise in poorer parts of North Yorkshire in his pre-Budget report later this month.

The Government is already targeting five neighbourhoods in the region, which will receive special help to attract investment and boost jobs as they are rated among the 2,000 most deprived in the country.

Selby South and Selby North, as well as Castle, Eastfield and Falsgrave wards, in Scarborough, will become "enterprise areas".

The special status will allow firms to bypass normal planning rules and escape stamp duty on purchases of business properties, to cut the cost of start-up.

Now details of further tax breaks, and other moves to make it easier for new firms to win planning permission, will be announced in Mr Brown's annual statement to Parliament.

But the accuracy of the figures was questioned today by Norman Whyte, chief executive of the York, Selby and Malton Business Advice Centres (BAC) Ltd, which each year handles about 3,000 inquiries and offers help and advice to 500 start-ups.

He said: "They are blunt, extrapolated. figures produced for the Bank of England by Barclays and Natwest, each of which have up to 30 per cent of the start-up market.

"They don't take into account the quality of new businesses. In York and North Yorkshire 70 per cent are still surviving after 18 months, compared with 50 per cent nationally.

"But the lack of start-ups cannot be ignored. There has been a slowdown largely because the city has a high level of employment, but also because there are no grants in York."

So how would he encourage more new businesses? "Give them some money. Not daft sums which can be frittered but enough to motivate and encourage them - perhaps 30 per cent towards the kit to get started."

Len Cruddas, chief executive of the York and North Yorkshire Chamber of Commerce, also expressed doubts about the figures, but stressed that the city could not afford to be complacent. There was a need to cut through red tape for start-ups, and also to concentrate on skills shortages in the city. "That includes entrepreneurial skills," he said.

Updated: 09:31 Wednesday, November 13, 2002