London businesses sound alarm on UK economy ahead of Budget as just one in 10 attempted to recruit for a second quarter in a row

Thursday 1 October 2026

Only one in 10 London businesses (10%) attempted to recruit in Q3, unchanged from Q2, according to the London Chamber of Commerce and Industry (LCCI)’s latest quarterly economic survey. Among those that did attempt to recruit, 55% reported difficulties in doing so, while businesses continued to face pressure from high operating costs and weak demand.

The findings come just weeks before the Autumn Budget and reveal that six in ten of the capital’s businesses (60%) think lowering inflation or the cost of doing business should be a government priority. Half reported higher fuel costs (55%) and energy costs (51%) in Q3, while 38% saw domestic raw-material costs increase.

Weak consumer demand is adding to the pressure. Three in ten businesses (29%) reported lower domestic sales over the quarter, broadly similar to Q2, while the proportion reporting an increase in sales fell from 16% to 13%. Domestic orders showed a similar pattern, with 29% reporting a decrease and 12% an increase, pointing to continued weakness in the pipeline of new business.

This is feeding through into hiring and investment. Just 5% of all businesses managed to increase employment, while only 6% increased spending on plant and equipment, broadly consistent with the previous three months. Looking ahead, just 5% expect to increase staffing over the next three months, compared with 10% expecting a reduction.

LCCI is calling on the government to use the Autumn Budget to reduce the cost of doing business and create the conditions for firms to invest and grow. This includes reversing the increase in employer National Insurance and delivering business rates reform, alongside action to cut planning bureaucracy and progress vital infrastructure such as Crossrail 2. LCCI is also calling for greater support to help young people into work and improve access to skills, helping businesses access the workforce they need to expand. LCCI’s full Budget 2026 Submission can be found here.

There are some signs of reduced pessimism about the year ahead, but businesses remain cautious. Expectations for firms’ own prospects improved in the last three months, with 29% expecting them to worsen compared with 37% in Q2. However, wider economic expectations remain more negative, with 42% expecting UK economic growth to deteriorate and 40% expecting London’s economy to worsen.

Commenting on the findings of the report, Karim Fatehi OBE, Chief Executive Officer of the London Chamber of Commerce and Industry (LCCI) said:

“London’s businesses are telling us they have capacity to grow, but the conditions to do so are not there. For the second quarter running, nine in ten businesses did not attempt to recruit at all. When the cost of hiring becomes a barrier to taking on people, that has consequences for businesses' ability to grow and for people trying to get into work. We cannot help one million young people who are NEET if only 10% of London firms are hiring.

“The Autumn Budget is a critical opportunity for the government to stimulate recruitment, reduce business costs and make London more internationally competitive. Reversing the increase in employer National Insurance would make it cheaper for businesses to hire, alongside meaningful business rates reform and action to cut the planning barriers that hold back investment.

“If the government wants to achieve growth across the whole country, it must make an active choice and support the conditions a capital city needs to invest, build a business and create jobs.”

Other key findings:

Business confidence

• London businesses remained cautious about the year ahead, with 30% expecting turnover to decrease and 25% expecting an increase.

• Profitability expectations were weaker, with 32% of firms anticipating a decrease compared with 21% expecting an improvement.

• Views on companies’ own prospects improved from Q2, although 29% expected them to worsen compared with 17% expecting an improvement.

• Larger firms were more positive, with 50% expecting turnover to increase, compared with 24% of micro businesses.

Economic outlook

• 18% of London businesses expect the UK economy to improve in the next 12 months, while 42% expect it to worsen.

• Expectations for London follow a similar pattern, with 19% of firms expecting improvement and 40% expecting conditions to worsen.

• Larger firms were more positive, with 33% expecting UK growth to improve and 37% expecting London’s prospects to improve, compared with 17% and 18% respectively among micro businesses.

• Despite this wider pessimism, 60% of firms disagreed that national economic growth was achievable without growth in London.

Business costs

• Cost pressures remained widespread, with half of London businesses reporting higher fuel (55%) and energy (51%) costs, although fuel pressures eased from Q2.

• Manufacturers faced consistently greater input-cost pressure than services firms, particularly for fuel (74% vs 53%) and internationally sourced materials (63% vs 30%).

• Utilities remained the most commonly cited pressure to raise prices (27%), followed by labour costs (23%) and raw materials and fuel (19% each).

• Inflation remained the leading external concern, cited by 46% of firms, while 60% said lowering inflation or the cost of doing business should be a government priority.

Domestic and export demand

• 13% of firms reported higher domestic sales, including 12% of micro businesses and 44% of larger firms.

• Domestic orders followed a similar pattern, with 12% of firms reporting an increase, compared with 29% reporting a decrease.

• 16% of exporters saw increased export sales revenue in the last quarter, while 28% reported a decrease.

• 15% of exporters reported increased export orders, compared with 25% reporting a decrease.

Labour market, recruitment and training

• Workforce levels were broadly stable in Q3, with 83% of businesses reporting no change, while 12% reduced staff and only 5% increased their workforce.

• Larger businesses were more likely to expand, with 32% increasing employment compared with just 4% of micro businesses.

• Recruitment activity remained limited, with only 10% of firms attempting to recruit, although this rose to 60% among larger businesses. Among those recruiting, 55% experienced difficulties.

• Training investment was largely unchanged, with 7% of firms increasing spending and 9% reducing it, while internal training remained the most common way of acquiring new skills.

Cashflow and investment

• Unused capacity remained widespread, with 64% of London businesses operating below full capacity, up from 59% in Q2.

• Cashflow remained under pressure, with 31% of firms reporting a decrease compared with 12% reporting an improvement.

• Larger firms reported stronger cashflow, with 42% seeing an increase compared with 11% of micro businesses.

• Investment in plant and equipment was largely static, with 6% of firms increasing investment and 10% reducing it.

ENDS

Notes for Editors

• The London Quarterly Economic Survey is produced by the London Chamber of Commerce and Industry. It forms part of the UK’s largest and longest-running independent business survey, coordinated nationally by the British Chambers of Commerce.

• YouGov is an international online research data and analytics technology group. Its panel comprises millions of registered members across 64 markets, generating millions of interconnected data points. Combined with its technology platforms, this enables the delivery of real-world insights across a range of economic, social and business issues.

• Q3 2026 is the second London Quarterly Economic Survey wave delivered by YouGov. This report uses Q2 2026 as the baseline for direct quarter-on-quarter comparisons where the question wording, routing, sample definition and weighting remain materially unchanged.

• All figures, unless otherwise stated, are from YouGov Plc. Total sample size was 514 senior decision-makers in London businesses. Fieldwork was undertaken between 5th and 28th August 2026. The survey was carried out online. The figures have been weighted and are representative of private sector London businesses by size and industry.

• This survey was conducted using an online interview administered to members of the YouGov Plc UK panel of 2.5 million+ individuals who have agreed to take part in surveys. Emails are sent to panellists selected at random from the base sample. The responding sample is weighted to the profile of the sample definition to provide a representative reporting sample. The profile is normally derived from census data or, if not available from the census, from industry-accepted data.

• Net balance figures indicate the percentage of businesses reporting an increase or improvement minus the percentage reporting a decrease or deterioration. Percentages may not sum to 100 because of rounding. Results from questions allowing more than one response may sum to more than 100%. Questions asked only of a subset of respondents are reported using the relevant routed base.

• Two categories are used for business-size analysis: micro businesses with fewer than 10 employees, including sole traders, and larger businesses with 10 or more employees, covering small, medium-sized and large firms. Sector, size and geographic comparisons are descriptive unless otherwise stated.

• Figures calculated for this report from the YouGov results, including estimates based on rounded percentages, are identified as derived or approximate.

• Any data reproduced from this report must be fully referenced.

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