Home-grown success story

When Western Union closed its Newcastle branch in 1976, Mike Patton and S. J. Dean were out of jobs -- "redundant," as the British call it. As sales director and office manager of the branch, they had 37 years of service between them. All they had left was their redundancy payments and their experience -- and some old-fashioned north-of-England initiative.

"When you're made redundant at that age you take anything," says Mr. Dean. At least, most people do. Instead, these two formed a partnership, bought up Western Union's furniture and typewriters, rented some telex machines and a second-story office suite in a converted house, and set up Allworld Telex Relay Ltd. They now hire more people than Western Union did when it closed and have moved into a burgeoning market of selling telex supplies.

Behind this success story is one answer to the northeast's needs: the encouragement of small-business starts, or what Michael Sanders of the Cleveland County Planning Department calls "home-grown small firms."

Mr. Sanders cites an almost-completed study of the Cleveland economy from 1965 to 1976 by the Center for Environmental Studies, which shows that smaller businesses (with fewer than 100 employees) are the only ones showing consistent growth in jobs.

The study, and similar evidence in a recent report from the Massachusetts Institute of Technology, show that the background of the typical entrepreneur has been in a small company, Mr. Sanders says. There, the would-be businessman often learns management, finance, and sales, getting, he says, "breadth of knowledge and an ethos" unavailable to specialists working in large industries.

There are businessman can also acquire expertise, as Mr. Patton and Mr. Dean did at Western Union, directly useful in a small firm. This is not so in many large firms. Noting the numbers being laid off by British Steel Corporation, Mr. Sanders observes ruefully that "you can't go start a steelworks." His conclusion: The area needs to attract n ot the branch factories of established giants, whose profits often go outside the area, but the ready-to-grow small firms.

Ken Robinson, of Tyne and Wear County, agrees. "The industrial future of this country is going to be based on small industries," he says. Mr. Robinson has good reason to hope so. Late in December he learned that Inmos, the government-sponsored silicon chip manufacturer, had decided against Tyne and Wear in favor of a southern site for its new 1,000-job plant. Tyne and Wear had invested heavily in promotional efforts to attract the firm, even establishing a microelectronics institute in conjunction with the University of Newcastle in hopes of making the north a rival to California's "silicon valley."

Much of the effort of the promotional agencies -- which include the umbrella organization, the North of England Development Council, and a host of separate and sometimes-competing county and district councils -- has been designed to attract large businesses such as Inmos. The Development Council, however, has just had its funding withdrawn by the Department of Industry, as the government adopts a nationwide approach to promoting investment through the Invest in Britain Bureau and the British Overseas Trade Board. In the past, these agencies have produced a layering of duplicate effort, breeding inevitable competition.

"Having agreed that we'll all hunt together as a pack," says James Gardner, the Tyne and Wear chief executive, the problem remains that "whoever pulls the stag down wants to keep it."

The philosophy now has shifted. The various regions, it is felt, will improve in the long term in proportion as the national economy grows stronger, and not simply by vying with one another.

In the short run, attracting big outsiders will still help. But as the Development Council's John Bridge says, "The salvation of the region is in self-sustained growth" -- of the sort generated by the spinoffs of small businesses. History supports the conclusion that the northeast, as some think, is where it is today because of its stifling reliance on bigness, on the paternalism of the massive industries, and, more recently, on the handouts from big government. Both have bred a sense of resignation, some feel, among a populace unused to taking arms against a sea of economic troubles. It may be that the solution lies in the realization that individuals in the northeast, rather than in Whitehall, will finally shape the region's fortune.

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