Birmingham City Council leader Mike Whitby has revealed how he pleaded with Local Government Secretary Hazel Blears to approve proposals for a powerful West Midlands city region.

Coun Whitby said he spoke to Ms Blears on the telephone hours before the government announced that Birmingham and the other West Midlands metropolitan councils had lost out in the race to become one of Britain’s first city regions.

Manchester and Leeds are to be given the status instead, with new powers and budgets to invest in transportation and economic development.

But Coun Whitby believes his conversation will have some benefits.

Ms Blears agreed to continue to look at plans by the Birmingham, Coventry and the Black Country City Region Board to set up accelerated development zones – defined areas in towns and cities where councils are allowed to keep business rates for a period of up to 25 years.

West Midlands councils will be able to borrow money for major projects producing millions of pounds to boost economic development if ADZs are approved.

Coun Whitby (Con Harborne), who chairs the city region board, said: “Not to be selected as a pilot is a disappointment, particularly after the hard work invested in putting together a strong bid, and the clear benefits we presented to government with our ambitious plans for infrastructure development and work on skills and employment.

“I am equally disappointed that the announcement has come at a time when the city region is demonstrating how it can work together at its best, with a sophisticated partnership between local authorities, the business community and other key stakeholders – all of whom will share my disappointment.”

He added: “I was personally speaking to Hazel Blears right up to the deadline. She was particularly impressed by our ambitious proposals for an accelerated development zone, and in a telephone conversation I proffered our city region as a pilot area for this exciting work.

“Now, despite hearing in advance that we would not be a pilot area, I am pleased that the government has confirmed that further work is also underway with partners in the West Midlands on their proposals for an accelerated development zone and employment and skills.”

Coun Whitby said research had demonstrated an ADZ could bring 44,000 new jobs to the region and help reduce the skills gap.

He added: “Within our partnership we believe we have the potential to bring together local authorities, business groups and other regional agencies into a powerful body to match the best city regions in Europe, and deliver real improvements in people’s quality of living right here in the West Midlands.”

Birmingham Chamber of Commerce chief executive Jerry Blackett warned the government of a “severe backlash” from the business community.

He claimed the government had left itself open to criticism of bias following the decision to name Manchester and Leeds.

Mr Blackett said: “We fear that the business community in the West Midlands will be angered that the north has won again on a key decision on devolved government and that there will be a severe backlash from them.

“And they will view with suspicion that two government Ministers, Hazel Blears (Salford) and Yvette Cooper (Pontefract and Castleford), represent constituencies in the Manchester and Leeds region.”

West Midlands council leaders were given a firm warning two years ago that they would have to do much more to demonstrate leadership qualities in order to persuade the government to grant city region status.

Local Government Minister Phil Woolas, on a visit to Birmingham in March 2007, urged the seven West Midlands councils to show that they could make tough decisions about difficult issues like congestion charging and directly elected mayors.

He added that the councils – Birmingham, Coventry, Wolverhampton, Dudley, Sandwell, Walsall and Solihull – would have to stop acting as individual pressure groups and show the government how they could unify to deliver increased prosperity for the region.

The government would have to be certain that a West Midlands city region would be capable of taking decisions in a “fair and accountable way”, Mr Woolas added, before hinting that he expected to see prospective city regions lobbying over big issues such as bus deregulation or powers to set up a stock exchange.

It was clear from his remarks that the government remained to be persuaded that the West Midlands had the ambition, drive and unity to responsibly deal with the additional powers and budgets arising from city region status.

He was speaking barely six months after the culmination of a long and bitter row about the name of the city region – a spat that served only to amplify the territorial differences and parochial sensitivities of the seven councils.

After spending £10,000 on a consultants report, which recommended Greater Birmingham as the best name, council leaders decided on a compromise that pleased almost no one.

The name they came up with – the Birmingham, Coventry and the Black Country City Region – was condemned as a decision of “mind-blowing stupidity” by the Institute of Directors.

Even the Birmingham Chamber of Commerce, normally supportive, said something “a little snappier” would be better.

The name Greater Birmingham, it later emerged, was rejected because Coventry and the Black Country councils would not accept a title based on Birmingham – a city they regard suspiciously as dominating the regional agenda.