Two neighbouring councils in North Yorkshire have agreed to "separate" some existing services after deciding that the arrangement wasn't working.

Hambleton and Richmondshire councils have been sharing services since 2009, but operations including customer services and business support will be repatriated to their original local authorities within the next few weeks following a decision by the councils' cabinets.

Others services will operate under a service level agreement, with one council providing the operation for the other, while there will be reviews for many more services by the end of the year. Larger areas, including waste, environmental health, council tax, community safety and licensing will be looked at in greater detail next year and may remain shared.

Hambleton said that there had been "no big fall out" between the two authorities, but it was looking at new ways of providing services.

"Shared services have been a success and they've brought huge savings for both councils at a time when we were facing cuts. But it is now time to look at what is best for our residents. We have a new management team driving Hambleton forward. We are entering a new phase of working together," said Neville Huxtable, leader of Hambleton council.

"It took over two years to set shared services up so we cannot dismantle it within five minutes – nor would we want to. Some of the services will remain shared as that will be the best way forward for the authorities."

The dismantling of some of the shared services at the North Yorkshire authorities raises questions about the joining up of services and whether it is the best route for all local authorities. A number of councils in the Cotswolds recently revealed the challenges they had trying to get their cross-border collaboration, which includes back-office services, off the ground.

However, a number of local authorities have hailed sharing services as an effective way of making savings. London tri-borough councils comprising Hammersmith & Fulham, the Royal Borough of Kensington and Chelsea and Westminster, have announced in a 'one year on' progress report that they are on course to save £40m a year by 2015-16 by combining services and management costs.

Commenting on the tri-borough announcement, local government secretary Eric Pickles said that "no council should even contemplate cutting services before they have considered following this example".

Westminster put out a tender worth £1.2bn at the beginning of the year for a range of services including HR, business intelligence and disaster recovery, on behalf of itself and the remaining two tri-borough authorities.