London business confidence plummets amidst the worst economic climate in decades

Tuesday 12 July 2022

London Chamber of Commerce and Industry (LCCI) has today published the results of its latest quarterly economic survey, the Capital 500, which seeks to gauge business performance and confidence levels in businesses of various sizes across the capital.

The findings from the Q2 survey, which interviewed 510 business leaders in the capital between the 4th and 30th May 2022, provide a stark illustration of the difficulties businesses are facing in the current economic climate. Unsurprisingly, business confidence weakened significantly over the last quarter which reflects fears over inflation, weak demand and the threat of a recession. This evidence further substantiates calls on the government to do more to support businesses through these exceptionally difficult times.

The number of businesses with a positive economic outlook has dropped significantly since the last quarters, with just over one in three (36%) firms expecting their profitability to improve compared with 42% in Q1 2022. The proportion of businesses that expected profitability to worsen over the coming year grew from 18% to 26%, the most significant increase in five quarters. The severity of this downturn demonstrates the negative impact weak cashflow, intensifying cost pressures and softer profitability expectations are having on business confidence in the capital.

Businesses in London are also being squeezed by the cost-of-living crisis as consumers tighter their belts and domestic demand falls - a quarter (25%) of businesses said sales had fallen in Q2, up from 20% in Q1. The sectors worst affected were service sector businesses, particularly those based in professional services and the arts, entertainment and recreation industries.

Richard Burge, Chief Executive of London Chamber of Commerce and Industry (LCCI), said: “The results from our latest Capital 500 survey demonstrate the immense pressure businesses are facing as the operate in a deeply uncertain economic climate.  Time and again London businesses have demonstrated their remarkable resilience when faced with adversity, but current trading conditions are unsustainable. It is imperative that the government alleviates the cost of doing business crisis by introducing tangible support measures such as halting corporate income tax, reducing business rates and reversing the planned rise to National Insurance.”

Key findings from the Q2 Quarterly Economic Survey:

Prior to UK inflation reaching a new 40-year high in June of over 9%, businesses highlighted legitimate concerns over future rises:

  • Three quarters (76%) of business said they are more concerned about inflation now than they were 3 months ago
  • Two in five businesses (43%) said that their cost of borrowing had increased in the last three months, the highest share recorded by the Capital 500 since Q2 2014.

The cost of doing business crisis was felt acutely with the rise of energy and fuel costs:

  • Three quarters of businesses (77%), said energy costs have gone up in the past 3 months, an eight-percentage point increase from Q1 2022.
  • Over three in five (63%) businesses named utilities as putting them under pressure to raise prices, more than any other cost pressure (e.g. fuel or labour costs).
  • 75% of all London businesses said that their fuel costs had risen in Q2, up sharply from 61% in the Q1 2022 survey.

Unsurprisingly, the economic outlook for the capital took a severe downturn in Q2 as cashflow failed to recover:

  • Nearly half (48%) of London businesses expect the capital’s economy to worsen over the next 12 months.
  • The proportion of businesses expecting the UK’s economic growth to worsen has risen from 38% in Q1 2022 to 56% in Q2.

Read the full report here.

ENDS

Contact:

London Chamber Press Office

T: +44 (0)20 7203 1897

M: +44 (0)7827 241528

E: press@londonchamber.co.uk

Notes to editors:

Savanta ComRes surveyed a total of 510 London business leaders between 4 May and 30 May 2022. All data were weighted to be representative of all London businesses by company size and broad industry sector. Savanta ComRes is a member of the British Polling Council and abides by its rules. Full data tables are available at www.comresglobal.com.