Thousands of defence contracts are to be opened up to nationwide competition - and North-East companies are set to benefit.

The Ministry of Defence has decided to advertise all its requirements for goods and services, down to a minimum of a £40,000 contract.

Until now, the ministry has only employed SMEs through its approved supplier list, or through subcontracting from prime contractors.

Only contracts worth at least £93,000 for `non-warlike' contracts and £685,000 for `warlike' were advertised on the open market.

The change means SMEs in the North-East will have the opportunity to compete for more MoD work without having to devote time and money to attending trade fairs, or networking to get themselves established as approved suppliers.

With defence in this region worth around £800m per annum, and supporting around 8,000 jobs, the change of policy from the MoD could have a significant impact.

Defence industry experts say they hope this will mean more of a `what you know, not who you know' approach to awarding work.

The Ministry has estimated the changes could see an extra 7,000 adverts issued each year - particularly as it is also encouraging its project teams to consider advertising work worth as little as £20,000. Lobbying body Northern Defence Industries (NDI) has welcomed the MoD's decision to advertise more contracts, and said it was keen for the thresholds to fall even further.

Trevor Harrison, managing director of NDI, said: "This change in policy means that SMEs in the North-East serving the defence market will be able to discover great opportunities at lower cost and with less administration.

"It can only be a good thing and we look forward to the greatest possible lowering of the thresholds at the earliest possible date."

Adam Ingram, armed forces minister, said: "This will give greater encouragement to small and medium enterprises to enter MoD business and is designed to further enhance the visibility and transparency of the UK defence equipment market.

"In line with one of the key themes of the Defence Industrial Strategy, this is one of a range of initiatives aimed at making the MoD easier for small and medium companies to do business with."

In 2005, over half of all MoD contracts were let with SMEs, with a value of more than £500m.

The changes to the MoD's advertising policy will be phased in over the coming weeks, with the final thresholds to be in place by June 30 this year.