The UK's economic North-South divide is beginning to close, a report based on the Competitiveness Index suggests.
The North East was one of the most improved regions
Research showed London, the South East and east England were less competitive when judged on economic factors such as employment and start-up rates.
Meanwhile, the traditionally less competitive areas of Northern Ireland, Yorkshire, Wales and the north-east of England were markedly more competitive.
But London remained the most dynamic area on the index which began in 2000.
The North East continued to be the least competitive overall.
Robert Huggins, who compiled the Competitiveness Index, said that a new chapter was about to be written.
"For as long as most of us can remember, the story of the UK's economic performance has been a tale of two nations - the go-ahead London and south east region and the north and west of the country stuck in the doldrums of post-industrial blight," he said.
UK COMPETITIVE INDEX*
1 London (1)
2 South East (2)
3 Eastern England (3)
4 East Midlands (4)
5 South West (5)
6 Scotland (8)
7 West Midlands(6)
8 North West (7)
9 Yorkshire & The Humber (9)
10 Northern Ireland (10)
11 Wales (11)
12 North East (12)
*Source - UK Competitive Index 2006; 2005 ranking in brackets
The study measures a number of factors, such as business start-up rates and employment rates.
According to the report the "competitive and operating environment in many lagging regions has improved markedly".
It points to the North East where the level of innovation - reflected by trade mark and design applications - was second only to London.
Meanwhile, areas that traditionally suffer high unemployment rates, such as Northern Ireland, the North East and Scotland also experienced positive changes.
Mr Huggins added that the figures indicated that the government's devolution and regional development policies could be bearing fruit.
"The signs are that strategic development through devolved institutions and regional development agencies is starting to make a difference," he said.
"Targeted regional investment appears to reduce unemployment and lift regional competitiveness."
However, the Work Foundation's director Ian Brinkley added that the figures should be treated with caution as they reflected just one year's data.
Meanwhile, the foundation itself added that the improved figures should not lead to complacency, saying: "Major problems persist."
According to the report's figures business start-ups fell across the country, while in some areas there are not enough companies to create competitive economies that can be maintained.