Hey Timmo,
As Tim mentioned one of the most effective ways to generate new business is referrals and word of mouth, obviously it can be a catch 22 when you're first starting out so it's worth considering taking on some projects at a discounted rate for local charities or friends/family. Once you've started to build up the portfolio you can then look to promote yourself, I've found business forums to be quite effective as Mark/Eagle mentioned. Above all reputation is what keeps the work coming in, if you deliver a good service and value to a client, they will most probably recommend your services.
It's also worth working on your own site SEO, if you're focusing on web design, as this will naturally be one of the first places a potential client could find you, try to optimize your site for local related terms.
HTH
Greg