Skilled workers are coming North - and staying - it was claimed last night, despite new research suggesting that the regional divide with the South is widening.

Academics at the University of Sheffield claimed yesterday that a drift of skilled workers moving from the North to London between 1991 and 2001 had widened the regional divide.

But the research was branded out of date last night, as statistics showed the North-East is benefiting from a "brain gain" over recent years.

Margaret Fay, chairman of regional development agency One NorthEast, insisted: "We have turned the corner. We are seeing a new vibrancy and new industries."

The Sheffield report, based on census data, showed more than 1.7m jobs were created in London's financial sector during the period, while the number of skilled trade workers, based almost exclusively in the North, declined by 500,000.

It showed better education levels in the South, while the percentage of university graduates based in London rose from 16pc in 1991 to 20pc in 2001. Over the same period, Northern cities suffered population decline.

One of the report's authors, Bethan Thomas, said: "There are prosperous places in the North. We're calling it the archipelago, because there are islands of prosperity, including Newcastle.

"It's not all doom and glom, but I must say, the order of magnitude in the South-East is very much bigger."

Ms Fay said: "I think the report is already out of date. A report that goes over a 10-year period that ended in 2001 is hardly representative."

Research published at the end of last year showed for the first time more people moving from London to the North-East than going in the other direction, while 36pc of workers in Newcastle and Gateshead came from outside the region.

In 2002, 45pc of Newcastle University graduates stayed in the region, compared to 39pc in 1998. Only 21pc of students come to the university from the North-East.

The number of Northumbria University graduates staying in the region had shot up from 40pc to more than 70pc.

Ms Fay said: "This just doesn't compare to the negative focus we're seeing in this report."

Newcastle University vice-chancellor Prof Christopher Edwards said: "The ability of a region to provide employment for highly trained and forward-thinking young people is an excellent barometer of economic health. The steady increase in graduate retention bodes well for the future.

"We are able to attract some of Britain's brightest youngsters and persuade them to stay."

Houghton and Washington East MP Fraser Kemp said: "I think what's amazing about the North-East, two decades after the destruction of many of its major industries, is how it managed to rise from that. Nobody's complacent and there's still a long way to go, but let's celebrate how far we've got and the success we've had."

And Tynemouth MP Alan Campbell said: "From my constituency point of view, unemployment is down 52pc since 1997, waiting lists are down, school results are up and the gap in house prices with the South has narrowed."

Page 2: Sea change offers growing hopes for region's future