Chamber wants action as confidence amongst London’s businesses plummets

Tuesday 8 January 2019

A major survey has highlighted the loss of confidence in the London and UK economy amongst the capital’s businesses – with London Chamber of Commerce and Industry (LCCI) calling on the Government, London’s Mayor, and the Mayoral election candidates to urgently act upon the findings.

The Capital 500 Quarterly Economic Survey has been released by LCCI, with the results showing business expectation of the London economy, and overall company prospects, falling to their lowest recorded levels.  The survey findings also shine a light on declining domestic sales, reduced cashflow, and companies encountering difficulties in increasing their employment levels. 

The polling, carried out by the independent research agency ComRes on behalf of LCCI, is based on responses from over 500 London businesses – which makes it London’s largest and most authoritative regular business survey.

Commenting on the results, London Chamber of Commerce and Industry Chief Executive, Colin Stanbridge, said:

“Capital 500 is London’s largest business survey and, with all business confidence and economic indicators falling and cashflow balance at a record low, these results should act as a wake-up call for the Government. 

It is staggering that we are now weeks away from leaving the European Union and businesses still don’t know the terms of that departure and what preparations they require, Government must urgently provide that clarity.  Businesses, particularly those small and medium sized, need support and encouragement in these exceedingly turbulent times.

And with the next Mayoral election just over a year away, commitments from the main candidates to pursue an agenda of greater devolution to London would also be welcome – as retaining more of the tax generated in the capital and securing new policy competencies would ensure City Hall has the necessary resources to drive and deliver future growth.”

LCCI makes four key recommendations following the latest survey to help the Mayor and the Government ensure London businesses can feel better equipped for the future:

Recommendation 1: London will need greater powers to accommodate forecasted population growth. Retaining more of the tax generated in the capital and securing new policy competencies would ensure the Office of Mayor has the necessary resources to drive and deliver future growth.

Recommendation 2: The Mayor of London should explore the potential for a dedicated Shortage Occupation List for London (LSOL) to make it easier for businesses to secure the skills and talent they need to sustain themselves in the long-term.

Recommendation 3: The Mayor of London should liaise with established business groups to create a post-Brexit one-stop shop resource at City Hall that is available 24/7 to help London firms.

Recommendation 4: Consideration should be given to exempting areas of strategic importance to the economy from Permitted Development Rights in order to protect vital business and workspace.

Key findings from the Capital 500 Q4 2018 survey include:

Business confidence:

  • All Capital 500 business confidence indicators decreased in Q4 2018. This is the second consecutive quarter in which all business confidence indicators have either fallen or remained stable. 
  • The balance figure for overall company prospects (-11%) decreased to its lowest recorded level since the start of the Capital 500 in Q1 2016.
  • The Capital 500 turnover balance figure (+5%) also fell to its lowest recorded level to date, while the profitability balance figure (-2%) is now at its joint lowest recorded point.

 Economic outlook:

  • Expectations for both the London and UK economy fell further into negative territory. The figures have now been negative for ten and eleven quarters respectively. The Capital 500 balance figure for expectations of the London economy fell by 12 points to -28%, its lowest recorded level to date. The figure for the UK economy fell by 7 points to -34%.
  • Micro businesses were more pessimistic about UK economic growth than larger businesses, with on balance, 36% of them expecting the economy to worsen compared to 18% of larger businesses. 

 Labour market:

  • The employment balance figure (-5%) dropped to its lowest point since Q1 2017 and its joint second lowest level since the start of the Capital 500. It has now been negative for ten consecutive quarters.
  • The Capital 500 figure for employment expectations also fell sharply on last quarter, dropping by 5 points. The balance figure is now at its joint lowest point to date at +2%.

 Recruitment and training:

  • The percentage of companies looking to recruit dropped to 12%, its second lowest point since the start of the Capital 500.  Of those that did try to recruit in Q4, 58% encountered difficulties, 3 points higher than last quarter.  61% of all businesses said that they are operating at below full capacity.
  • The balance figure for companies looking to invest in training remained broadly consistent with the previous quarter at +1%.

 Cashflow and investment:

  • The cashflow balance figure fell to its lowest point (at -10%) since the beginning of the Capital 500, decreasing by 8 points on the last quarter. The figure has now been negative for 11 consecutive quarters.

Business costs and prices:

  • The balance figure for the amount of businesses who expected to raise their prices over the next three months rose by 4 points (+27%), with firms most commonly citing raw material costs (19%), finance costs (19%) and other overheads (33%) as pressures to raise prices.
  • Q4 saw little movement on the previous quarter in terms of raw material costs, with the balance figure for raw materials sourced domestically (+25%) remaining stable and the figure for those sourced internationally (+22%) increasing by one point.
  • The balance figure for the cost of borrowing (+13%) during Q4 fell to its lowest point since Q3 2017, while the figure for cost pressures to increase wages (+18%) fell flat for the third consecutive quarter.  
  • The balance figures for the cost of energy and cost of fuel both increased, raising by 5 points (to +37%) and two points (to +46%) respectively.

Domestic and export demand:

  • Q4 recorded slight downturns in both domestic demand figures.  The figures have now been negative for six consecutive quarters.
  • More businesses reported an increase than a decrease in export demand figures in Q4, with both figures increasing by one point for the fourth consecutive quarter.

ENDS

Media contact
Steven Reilly-Hii
T: +44 (0)207 203 1897                     
M: +44 (0)7827 241528
E: sreilly-hii@londonchamber.co.uk

 

NOTES TO EDITOR:

  1. Colin Stanbridge is available for further comment and interview.
  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 leading polling company, 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.
  4. The balance figures represent the percentage of firms that reported an increase minus the percentage that reported a decrease or firms that selected improve minus the percentage that selected worsen.
  5. In Q4 2018 ComRes surveyed a total of 507 London business leaders between 26th October and 21st November 2018. All data were 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.  Full data tables are available at www.comresglobal.com
  6. 6. Read the full report here and follow the discussion on Twitter using #Capital500.