Now is the time to rise to the economic challenge says London Chamber of Commerce and Industry

Wednesday 4 Jan 2017

Now is the time to rise to the economic challenge says London Chamber of Commerce and Industry

Businesses need Government support to continue to weather an uncertain storm, new research from London Chamber of Commerce and Industry (LCCI) has found.

The latest Capital 500 Quarterly Economic Survey carried out by ComRes on behalf of LCCI found that businesses had shown resilience following the uncertainty delivered by the referendum, but LCCI believes a boost is still needed from the Government.

LCCI believes this should include support to deal with airport capacity constraints, rising business costs, and pressing skills shortages, all which are vital for London to remain globally competitive.

Chief Executive of LCCI, Colin Stanbridge said: "In 2017 we expect Article 50 to be triggered, the starting gun for negotiations on the UK's relationship with the EU. Much remains uncertain, but it is clear that businesses, after the initial shock of the referendum, have demonstrated their resilience and underlying strengths, as demonstrated by the uptick in most indicators of London business performance.

"With the political events and repercussions of 2016 it has never been so important to focus on efforts to strengthen the foundations of London's economy and its ability to deal with the challenges."

LCCI makes four key recommendations following the latest survey to help the Mayor and the Government rebuild London business confidence:

Recommendation 1: The Government should boost airport capacity by seeking best use of existing infrastructure through airfield, terminals and rail-link enhancements in the London airports system.

Recommendation 2: The Government should task the independent Migration Advisory Committee with maintaining a separate 'Shortage Occupation List for London' (as Scotland has) to access the skills and talent necessary to ensure the long-term sustainability of the capital's
economy.

Recommendation 3: London's business rates could be 'de-coupled' from the national valuation system, whereby an increase in London's rateable values would not inevitably lead to significant increases in business rates (while this would not have to depress the tax base in other areas).

Recommendation 4: London will need greater powers to accommodate forecasted population growth. Retaining more London generated taxes and securing new competencies are key.

Key findings from Capital 500 Q4 2016 survey include:
- Domestic demand figures bounced back during Q4 2016, but remain negative overall, as more businesses reported a decline than an increase in domestic sales and orders. While larger businesses, on balance, increased their domestic sales during Q4 2016 (+17%), micro businesses continued to experience a decline (-3%).
- Export demand continued to decline during Q4 2016, with both sales and orders reaching their lowest recorded Capital 500 level. The balance figures for both export sales and export orders saw a 1 point drop, and have now been declining for three consecutive quarters.

Labour market: 
- The Capital 500 employment figures picked up during Q4 2016, following record lows in the previous quarter. The balance for employment levels over the last three months remained negative at -2%, but increased by 4 points compared to Q3 2016.
- Expectations for the next quarter also improved, as on balance, 4% of businesses expect their workforce to grow, up 2 points on last quarter.

Recruitment and training:
- Following a decline during the previous two quarters, there has been an increase in the number of companies planning to invest in training during Q4 2016. 
- 14% of businesses were looking to recruit during Q4, in line with Q3. 40% of those businesses were recruiting for part-time and 57% for full-time positions. 
- Of the companies looking to recruit, 48% encountered difficulties finding sufficiently skilled candidates

Business costs: 
- For all analysed business costs, more companies reported an increase than a decrease during Q4 2016.
- By far the largest cost increases were reported for energy and fuel: the balance for the cost of energy rose by 13 points, to +26%, while the balance for the cost of fuel rose by 29 points, to +44%.

Cashflow and investment: 
- Capital 500 companies' cashflow position remained negative during Q4 2016, but improved compared to last quarter. On balance, 2% of businesses reported a decrease, up 5 points from Q3, and the balance figure is now back on the same level as in the last poll before the Referendum.

Business confidence: 
- Capital 500 companies' expectations for the next 12 months stabilised during Q4 2016 with a balance figure of -5%. The balance figures for both turnover expectations (+8%) and profitability expectations (+2%) remained overall positive.
- While micro businesses, on balance, remained pessimistic about their company's prospects (-5%), a more positive figure was recorded for larger businesses (+8%).

Economic outlook: 
- Following 5 consecutive quarters of declining balance figures, there has been an uptick in expectations for the UK as well as the London economy, although both remain in negative territory
- Inner London businesses were on balance more pessimistic about the prospects of London (-22%) and the UK (-29%), than businesses based in Outer London (-9% and -15% respectively).
- London's prospects were, on balance more often perceived to be negative by micro businesses (-16%) than larger businesses (-11%). In contrast, larger businesses were more pessimistic about the UK's prospects (-25%), than micro businesses (-21%).


ENDS

Media contact
Katharine McGee
T: +44 (0)20 7203 1897     
M: +44 (0)7827 241528
E: kmcgee@londonchamber.co.uk

NOTES TO EDITOR:
1. London Chamber of Commerce and Industry (LCCI) is the capital's largest and most representative business organisation, with members ranging in size from multi-national companies to SMEs and sole traders.
2. For over a decade LCCI has conducted a Quarterly Economic Survey (QES) to gauge business performance and general confidence levels across the capital. This is part of the longest running national private business survey, conducted by regional chambers of commerce across the UK every quarter.
3. Since Q2 2014, LCCI has partnered with ComRes, to expand the survey beyond LCCI membership to poll a panel of London businesses - the Capital 500 - that are fully representative of the London economy by business size and broad industry sector. Data on the highest recorded levels refers to Capital 500 data over the last two years.
4.  The balance figures representative the percentage of firms that reported an increase minus the percentage that reported decrease.
5. ComRes surveyed 502 London business decision makers online between 2nd and 22st November 2016. Data was weighted to be representative of all London businesses by company size and broad industry sector. ComRes is a member of the British Polling Council and abides by its rules. Data tables are available at www.comresglobal.com
6. Follow the discussion on Twitter using #Capital500
7. Colin Stanbridge, chief executive is available for further comment and interview.