Member Article

North East entrepreneurship driving wealth creation and economic recovery

Andrew Miller, Regional Director of Barclays Wealth and Investment Management North East, shares an exclusive blog with Bdaily, reflecting on the entrepreneurial successes of North East enterprises in 2014.

2014 was a fantastic year for business in the North East. Entrepreneurship and wealth creation in the region have continued to gather pace, debunking the myth that economic recovery is being led from the capital, and showing that we are heading in the right direction as we look forward to 2015.

Our most recent Entrepreneurs Index, developed in conjunction with Business Growth Fund (BGF), showed that, between March 2013 and 2014, the number of enterprises in the North East rose by 5.2%, to 59,340, the highest year-on-year percentage increase in the number of enterprises in the region after London. Newcastle alone saw a 4.6% rise in the number of enterprises, to 6,680. The North East also experienced a 6.4% increase in the proportion of high-growth companies, a trend also observed in the previous edition of the Index, which suggests an upward trajectory of growth.

There are multiple benefits to be reaped from this increased spirit of innovation in the North East. Our research has shown us that entrepreneurship is now one of the main drivers of wealth creation, and so as entrepreneurship continues to grow, so does the North East’s high net worth population.

The rise in number of wealthy people in the North East carries wider economic and community benefits, as well. Our recent research report, Wealth Insights Volume 18, found that high net worth individuals in the North East have more community spirit than any other high net worth group in the country, with 52% saying they identify strongly with their local community. This is also reflected in their attitudes towards philanthropic giving, with 67% of this wealthy group in the North East preferring to give to local rather than global causes – also the highest in the country.

As we look back over a great year, and forward into 2015, many clients and investors have questions about what the future holds, and what markets will do in the coming months. These questions come as no surprise to us, as we have characterised the current economic/market moment as the “Great Divergence.” It is the time when growth trajectories around the globe are starting to part ways and as such, those looking to invest next year may want to consider the wider outlook.

One of the most important aspects to take into account is that interest rates are in a period of transition. In the euro zone and Japan, interest rates will likely remain repressed by central bank quantitative easing. In the United States, the transition to a more market-based pricing of money is under way as quantitative easing has come to an end, and the advent of higher interest rates is likely only months away. Financial history has demonstrated that prolonged periods of cheap and easy money create all sorts of mal-investment that are – often painfully - revealed when market forces begin to assert themselves again.

Higher interest rates due to faster growth are not a problem but a blessing. A great deal will be written about the impact this will have on equity markets. The first interest rate increase will be the hardest for the market to digest, as it forces the formation of a new consensus. Faster economic growth that brings with it more investment, consumption, employment and profits, with or without higher interest rates, is always better than low interest rates and weak growth. Whatever the future holds for investors in 2015, keeping this principle in mind will help to separate signal from noise.

Overall, the future looks bright in 2015 for business in the North East. Here’s to building on the success of 2014, and continuing to foster the spirit of innovation and entrepreneurialism that makes the region such a great place to live and work.

This was posted in Bdaily's Members' News section by Barclays Bank PLC .