18th January 2011: A Tough Year Says Economist, But Better Days To Come

Entrepreneurs hold the key to driving forward the North East economy as it faces a squeeze on consumer spending over the next year, a leading economist has predicted.

After a tough 12 months, the region should begin to see an improving economic picture over the next two or three years as the budget deficit is reduced and government revenue grows.

Douglas McWilliams, founder of think-tank the Centre for Economics and Business Research Ltd and former chief economic advisor to the Confederation of British Industry, said North East entrepreneurs provided "the acorns from which oaks will begin to grow" but it would mean breaking out of a culture previously reliant on the public sector.

"The rate of business start-ups is relatively low. In a sense they have been stymied by a culture that has looked to the government rather than to do things for themselves," he said as a guest speaker at the Entrepreneurs' Forum annual Chairman's Dinner.

Cuts would have a greater impact on the region because of its disproportionate share of public spending, he said.

But North East entrepreneurs were particularly strong, and the IT revolution meant they were less dependent upon local customers.

"It's easier for a region to transform itself quickly than it would have been in the past," said Mr McWilliams, a regular economics commentator on television and radio and whose clients include Siemens, Vodafone, Oracle, Transport for London and The Crown Estate.

The North East was a distilled version of the national picture, which he said was looking much more exciting in a couple of years' time.

"At the moment we are climbing up the hill but when we get to the slide down it will be much better. 2013, 2014 and 2015 could be quite good years for the British economy," he added.

While the global economy goes through the biggest transformation ever, the UK was facing a "slightly bigger challenge" because of a mismatch between the economic cycle and the political cycle, said Mr McWilliams, who advises politicians on both sides.

Tom Maxfield, chairman of the Entrepreneurs' Forum, opened the event telling Forum members: "The future lies in our hands and each one of us has the opportunity to seize the moment and turn it to our advantage."

He posed the question if the coalition government was a good thing for business, and asked if members could ever take opposition leader Ed Miliband seriously after he said the budget deficit had nothing to do with Labour.

Mr Maxfield said it was the calibre of leadership that would prove critical, comparing the widely criticised performance of England coach Fabio Capello in the football World Cup to that of Andrew Strauss, captain of England's Ashes-winning cricket team.

One entrepreneur who survived a death threat by Russian mafia and spent five years trying to bring his business into profit before reaching stardom is Nick Jenkins, founder and chairman of Moonpig.com.

As guest entrepreneur at the dinner, held at Jesmond Dene House in Newcastle, Mr Jenkins said he was drawn towards starting his own venture by the "carrot of what might happen".

"As an entrepreneur it doesn't matter if you never get to the carrot; it's about the possibility and the chance to dream. You can't dream of winning the lottery if you don't buy a ticket," he said.

He spent nine years in Moscow working as a commodity trader for a sugar company and was involved in an MBO of the business, generating enough capital to invest in his own venture back in the UK.

Mr Jenkins, who failed to get the A level grades to secure a place at Newcastle Polytechnic but later went on to study Russian literature and an MBA, says the importance of having his own cash to invest in the business should not be underestimated when it came to securing external funding later.

"Lots of people have good ideas but don't have any money, but when it comes to raising finance it's more convincing if you've got some of your own," he explained.

"Investors are fairly cautious and if the owner has nothing to lose they are less likely to be interested. I do not think I would have got the funding if I had started it without my own money."

It was 1999 at the height of the dot come boom when he came up with the idea for Moonpig, realising that his own schoolboy nickname fulfilled all his criteria for a strong brand - simple, memorable and easy to spell.

The business now dominates the online greeting cards sector with 2.7 million active customers who purchased 12 million cards from the site during 2010.