North East entrepreneurs driving the economy

The annual Barclays Business Regional Impact Index launched today, reveals which regions in Britain benefit most from the contributions of their small businesses and crucially, the role they are playing in boosting recovery across the country.

A challenging environment for entrepreneurs in 2011 has delivered interesting shifts in this year's Index when compared to last year, with the North East moving up three places to take the top spot from London.

The South East has had the biggest fall, moving from fourth to the bottom of the table.

The Barclays Business Regional Impact Index is based on an in-depth study of around 1,000 owner-managers, combined with qualitative analysis by Kingston University's Small Business Research Centre. The study ranks each region on 13 key indicators including outlook on growth, employment generation, and expected profit.

This year's Index reveals a complex picture. Nationally, small businesses have ‘battened down the hatches' following a difficult year. Looking ahead to 2012, they remain cautious compared to last year – 49% have ambitions to grow compared to two thirds (66%) in 2010. Almost half (49%) expect an increase in profit during 2012, while a third (33%) expects profits to remain static.

Encouragingly, owners of small businesses still retain a good sense of optimism and are looking to innovation to help boost their business in 2012. Over a third (37%) of Britain small businesses looking to grow next year see innovation as the key driver, while 25% of businesses are doing more with less next year. Only 15% expect to take on new employees to help deliver growth.

Steve Cooper, managing director, Barclays - Business & Personal Banking Solutions said: "The current economic climate continues to have an impact on many small businesses in Britain. Confidence remains low and clearly businesses are cautious as we approach 2012, with job creation not being a priority in the short-term.

“Particularly in the South East and London, it seems the cuts in the public sector and a reduced role for service companies has raised fears of a decline. These fears could be unfounded, but the uncertainty is real enough to damage confidence.

"However, it is encouraging to see there is still optimism, with businesses introducing new products and services to help them prepare for the recovery. Innovation is a great way to drive growth in a business, potentially exposing small businesses to new markets both at home and abroad."

Across the Britain, the findings challenge the traditionally held belief of a North-South divide.

Key points from the Index include:

• The North East's lead position is driven by a strong performance in investment in innovation, proportionate turnover and firms that were born global.

• London has dropped one place, while the South East fell six places - these declines are potentially driven by the regions' reliance on the service industry.

• Overall, SMEs in London (57%), Central England (54%) and the North East (54%) are the most optimistic about growth in 2012 with businesses in the South East (40%) and South West (42%) the least optimistic.

• Future job creation is highest in the North East (21%), East of England (19%) and South West (25%) - however nationally, 65% of small business have no plans to recruit more people next year.

Commenting on the findings, Professor Robert Blackburn, small business research centre, Kingston University who developed the index said: "In terms of regional performance, the Barclays Business Regional Impact Index shows that SMEs in the North East, London and South West are proving to be the most resilient in today's tough economic climate.

“The North East, which tops the index is particularly interesting, and its position at the top of the table could be down to entrepreneurs in this region having a long-standing propensity to innovate and export beyond their limited regional market, in contrast to those enjoying close proximity to larger metropolitan markets."