The warning comes as latest figures reveal more businesses are hitting the rocks in North East of England than anywhere else in the UK.

There has been a massive 466 per cent rise in company administrations in the region, compared with last year.

Those hit hardest by the credit crunch and the harsh economic climate include IT, construction, electrical, plumbing and printing companies.

Geoff Ford, chairman of Ford Component Manufacturing Ltd, in Tyne Dock, South Shields, and leader of South Tyneside Enterprise Partnership (Step), said: "I hate to use the phrase 'dead wood,' but any companies which have serious weaknesses will go under.

"While I'm surprised at the rate of administrations in this region, my view is that we have no God-given right to fare any better in the north east.

"But recession accelerates the rate of failure. No one is immune from the current economic situation.

"And it's a fact that the majority of firms which go under, do so with a full order book, but with no cash."

Mr Ford said his own company had felt the knock-on effects of a slump in the construction industry, but stressed that the rest of his component business, particularly the aerospace division, is "solid".

Ian Brown, reorganisation services partner at business advisory firm Deloitte, said: "The impact of the harsher financial climate is being felt throughout the country, particularly in North East England, which has seen a staggering 466 per cent increase in the number of administrations, compared to the same period last year."

Mr Brown added that the "credit crunch is permeating all areas and industries," and that "more pain is to come".