Monday 3 April 2017
Businesses need solid support and reassurance as Brexit negotiations proceed
The Government needs to work hard to ensure London has a solid economic foundation to meet the twin challenges of Brexit and an expanding population, London's leading business group said today.
The latest economic survey, commissioned by London Chamber of Commerce and Industry, found that although businesses reported a boost in confidence and outlook for the year ahead there was also concern about cashflow as well as recruiting the right staff.
In making the negotiations, LCCI believes that the Government needs to recognise the uniqueness of London both in terms of its economic and infrastructure needs and its diverse workforce.
This would mean introducing a London Visa, working to mitigate the impact of business rates revaluation where most needed, committing to Crossrail 2 and recognising London as a key engine of the UK economy in its Industrial Strategy.
Chief Executive of LCCI, Colin Stanbridge said: "There are many signs of improvement; however, not all indicators are upbeat.
"We need to ensure that London is well equipped to meet the challenges of Brexit and a population that is set to meet 10 million by 2030.
Above all, alongside efforts to support balanced growth across the UK, a new Industrial Strategy must recognise the role that London currently has and will continue to play as the engine of the UK economy."
LCCI makes four key recommendations following the latest survey to help the Mayor and the Government ensure London businesses can feel confident and boost productivity during the negotiation period:
Recommendation 1: The Government's finalised Industrial Strategy should contain a recognition of London as a key engine of the national economy with its extensive procurement and supply chain across the UK. Efforts to generate balanced growth across the UK should not come at the expense of the capital; London strategic infrastructure projects should not face unnecessary delay.
Recommendation 2: The Mayor of London should champion a single issue 'London Work Visa' granting 'indefinite leave to remain' in the UK to existing EU National employees - providing reassurance to current employees and their employers.
Recommendation 3: While welcome, the discretionary relief announced at the Budget will only be beneficial if it reaches the businesses most affected by the Business Rates revaluation.
Government should look to ensure transparency on where, when and how much, relief has been allocated in local authority areas across the capital.
Recommendation 4: A revised business case for the Crossrail 2 project is currently before the Department for Transport for consideration. The Government should move to ensure that accommodation is made within Parliamentary timetabling for a hybrid bill before 2019.
Key findings from Capital 500 Q1 2017 survey include:
- Domestic demand declined during Q1 2017, following an increase in the previous quarter, and remain negative overall, as more businesses reported a decline than an increase in both domestic sales and orders.
- Export demand saw the same proportion of businesses report an increase as a decrease. The balance figures for both export sales and orders remained unchanged from 2016's final quarter, and continue to be at their lowest recorded Capital 500 level.
Labour market:
- Following an increase in the previous quarter, the Capital 500 employment figures dropped again during Q1 2017. The balance figure for businesses' employment levels over the past three months decreased by 4 points, to a Capital 500 (joint) record low of -6%.
- In contrast, expectations for the quarter ahead remained positive as, on balance, 3% of businesses expect their workforce to grow.
Recruitment and training:
- The number of companies looking to invest in training continued to increase during Q1 2017.
- Of the companies looking to recruit, almost half (47%) encountered difficulties finding sufficiently skilled candidates. Skilled manual/technical roles (50%) and professional/managerial roles (43%) continued to be the hardest to fill for recruiting Capital 500 companies.
- The most frequently recorded methods of acquiring new skills during the last three months were training existing staff (24%, which is the same figure as in Q4 2016), and employing new staff from the UK workforce (8%).
Business costs:
- Compared to last quarter, cost pressures either went up or remained stable during Q1 2017. The balance figures for the cost of borrowing (+8%), pressure from employees to increase wages (+19%) and cost of raw materials sourced internationally (+25%) all saw a 1 point change on Q4 2016.
- The balance figure for the cost of fuel) rose by 4 points to a Capital 500 record high of +48%. Another record high was recorded for the cost of raw materials sourced domestically which increased by 2 points to +28%.
Cashflow and investment:
- While Capital 500 businesses' cashflow position worsened during Q1 2017, capital investment continued to rise.
- The cashflow balance dropped by 7 points to a Capital 500 record low of -9%, and has now been in negative territory for four consecutive quarters. In contrast, the balance for investment in plant and equipment rose by 3 points (to +2%), as a positive balance was recorded for the first time since the referendum vote in June 2016.
Business confidence:
- All business confidence indicators went up during Q1 2017. The balance figure for overall company prospects rose by 5 points, and came out of negative territory for the first time since Q2 2016 (when a balance of +13% was reported).
- The balance figures also increased for turnover expectations (up 7 points) and profitability expectations (up 6 points) to +15% and +8% respectively.
Economic Outlook:
- Expectations of both London and the UK economy continued to improve during Q1 2017, but remain negative overall.
- Micro businesses, on balance, reported more negative a perception of the prospects of both London (-3%) and the UK (-9%); in contrast, larger businesses recorded positive expectations for both (+1% for the UK, +6% for London).
- Inner London businesses continued to be more pessimistic about both London (-6%) and the UK (-10%), than businesses based in Outer London (+2% and -5% respectively).
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. Colin Stanbridge, Chief Executive, is available for further comment and interview.
3. 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.
4. 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 since Q2 2014.
5. ComRes interviewed 504 London business leaders between 14 February and 2 March 2017. All data was weighted to be representative of all London businesses by company size and broad industry sector.
6. ComRes is a member of the British Polling Council. Full data tables are available at www.comresglobal.com.uk
7. The balance figures represent the percentage of firms that reported an increase minus the percentage that reported decrease.
8. Follow the discussion on Twitter using #Capital500