Business leaders have hit out at a failure of leadership among civic centre bosses as plans for a super council are halted.
Hopes of creating a new combined authority tasked with leading on job creation are in doubt after Sunderland Council said it cannot back the moves.
Wearside leader Paul Watson told the Government there was not enough support for plans to effectively merge some powers of the seven existing North East councils, although no local authority would be scrapped in the move.
England’s only existing combined authority, in Greater Manchester, has already been handed control of some £1.2bn of Government spending as ministers try to revitalise local decision making.
The likes of Newcastle and Northumberland have already backed the need for a combined authority in the region to help them boost the local economy.
It had been planned to pass a new law in April to form another combined authority in the North East, a move which was backed by the North East Chamber of Commerce.
With that plan now uncertain, Chamber chief executive James Ramsbotham has said it is vital the region gets its act together.
He said: “Local authorities risk letting this area down badly by failing to show the required unity and leadership to take our economy forward. Too many times parochial politics have got in the way of important developments for our regional economy and this must not happen now.
“There is an urgent need for our local authority decision makers to show the leadership required to get this project back on track, restore business confidence and demonstrate they are capable of putting the North East economy first.
“Chamber members are clear in their view that strategic issues including transport, skills, inward investment and spatial planning cannot be effectively delivered at local authority level alone.
“In addition, the Government has made it clear that important resources and policy flexibility will only be devolved on the basis of effective governance arrangements beyond local authority boundaries. Greater Manchester is already benefiting from this and several other English city regions want to do the same.
“Given Parliamentary timetables, this could be our only opportunity for several years to make sure the North East Local Enterprise Partnership area is in the premier league instead of falling further behind our neighbours.”
Last night South Tyneside leader Iain Malcolm said he agreed with Sunderland’s call to halt the process.
He said: “I am one of the biggest advocates for stronger regional leadership, but we have a duty to the people who elected us to get this right and not rush into it. This Bill goes through parliament and then we are locked into it, without in some cases even knowing what it would mean in the long term.
“It is incumbent upon any leader who has concerns to raise them and seek clarity, and for that reason I fully support Paul Watson.
“Personally I don’t think it is an ambitious enough document. If there is no clear idea what it will do the authority would be a talking shop, and that is the last thing local businesses would want.”