Case Study: Peter Vardy

11:44am Monday 10th March 2008

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Some of the region's biggest business names are backing a campaign to bridge the skills gap between the North-East and the south of England. Nigel Burton examines the scale of the problem and what needs to be done.

IT'S ironic that the region largely responsible for the first rush of British entrepreneurial spirit which transformed the world now lags so far behind the rest of the country. Without men of vision like railway pioneers Timothy Hackworth and George Stephenson, the industrial revolution may never have happened. The North- East was the driving force behind the changes that spread throughout Europe and North America, marking a major turning point in social history.

North-East entrepreneurs presided over hugely successful businesses which dominated global markets.

In 1900, one in four ships by tonnage was built in Sunderland's shipyards. In County Durham, 300 pits employed 165,000 miners.

A century later the picture is very different. The shipyards, coal mines and railway works have gone - replaced by what?

The bucaneering spirit of an earlier age has been replaced by a culture of low expectations and pessimism.

By clinging to its dying industries for too long, the North-East missed the chance to join a new business revolution that began in the late 1980s.

Worse still, while the North-East lagged behind, other regional centres - notably Leeds and Manchester - established themselves as providers of financial and business services to markets beyond London.

In his 2006 report, Understanding the Entrepreneurship Gap, Paul Benneworth, of the University of Newcastle, painted a bleak picture of the North-East's position.

He found: ■ The region lags far behind other parts of the country and has the lowest level of entrepreneurial activity; ■ the number of self-employed businessmen and women is 60 per cent lower than the UK average; ■ the rate of business ownership in the region is the lowest in the country; ■ business property rents are high, but purchase prices are low making it doubly difficult for new start-ups to raise extra funds using property as collateral; ■ new business survival rates are below average.

Entrepreneurs are vitally important because they drive growth and change by creating new products to meet emerging markets and finding new roles for existing assets.

Mr Benneworth says: "Just as new ideas render old ideas obsolete, so new products can make old products - and the people and machines that make them - obsolete. But machines, people and factories are not single use and entrepreneurs often see other uses for these assets that returns them to productive use in the market."

Interestingly, one the region's highest profile entrepreneurs believes the only thing holding the North-East back is its own expectation of failure.

Sir Peter Vardy took over his father, Reg Vardy's, car business in 1982, turning it into one of Europe's most successful motor retailers with a turnover of £2bn and 6,000 staff.

Sir Peter is a co-founder of the Entrepreneurs' Forum, which supports business owners in the region. He established a £50m venture capital fund to offer financial help so growing businesses can realise their potential.

He firmly believes his success can be replicated by anyone with drive and ambition.

"There is nothing intrinsically anti-enterprise about this region. There is nothing inherently deficient about its people. What is required is passionate leadership, ambition, total commitment to excellence and a willingness to take risks," he says.

"When Aston Martin asked me how we planned to sell luxury cars in a mining town in the North- East of England, I asked them for a chance to let us show what we could achieve. We ended up selling more cars out of Houghton-le-Spring than were selling across the whole of North America."

He believes success starts in the classroom and highlights the transformation in education in Gateshead, which has gone from one of the poorest performing boroughs in the late 1980s to one of the best.

Emmanuel College, sponsored by Sir Peter's charitable foundation, opened in 1990 and is now one of only 12 secondary schools in England to hold three consecutive outstanding' OfSTED ratings. Ninetynine per cent of its students gained five or more top GCSE passes this year.

Sir Peter, who sponsors two other specialist business and enterprise schools, says: "My dream is to see young people leave school, not only with a first class education, but also to have entrepreneurship as a serious career option. Our schools must realise the critical role they have in developing the entrepreneurial culture we all seek for the region."

There's much to be done. A State of the Region report compiled by the North-East Regional Information Partnership found the North-East has fewer businesses per 10,000 population than any other region in the UK.

It concluded that 32,000 new VAT registered businesses are needed to bring the North-East up to only the national average, and 18,000 new businesses just to meet the level of the next lowest region, Scotland.

A report by the Institute of Public Policy Research in 2006 identified the North-East as having the five worst areas in the country for business activity.

Faced with such a bleak picture, the Entrepreneurs Forum and regional development agency One NorthEast has launched the "If we can you can" campaign aimed at closing the gap.

Sir Peter Vardy is under no illusion about the size of the challenge. He says: "We are looking for a 50- 70 per cent growth in the absolute numbers of new VAT registered businesses. No amount of glossy brochures, spin and marketing can disguise an inconvenient truth. We must be open about our strengths and weaknesses as a region."

But Paul Benneworth believes the region can succeed. "He says: "Although there is a significant gap between the North-East and the rest of the country, the evidence suggests that it is not entirely insurmountable.

"There are also increasing numbers of new entrepreneurs who are taking their ideas forward and who are helping maintain a general entrepreneurial "buzz" across the region."

Somewhere out there the next Timothy Hackworth is already working on the "next big thing".

With a little bit of help, the North-East could once more become a thriving environment for innovation and new ideas.