Wednesday 03 October 2018
While Brexit is a key factor, the government must do much more to support the capital’s prosperity London Chamber of Commerce and Industry (LCCI) has warned.
The latest LCCI quarterly economic survey of more than 500 London businesses found that confidence levels in London remain low, despite positive signals.
The survey showed that more businesses report an increase than a decrease in exports, and that there continue to be issues around domestic demand and cashflow. In the current uncertain environment LCCI believes a booster is needed from government.
Chief Executive of LCCI Colin Stanbridge said:
“While many performance figures have gone up on last quarter, they remain low compared to pre-referendum levels. Concerns remain about the confidence of London’s business community.
“London businesses need certainty about the post-Brexit business environment including in relation to the future migration system.
“Beyond Brexit, more must be done to enhance the capital’s performance, including further devolution of skills funding, a fundamental review of business rates and prioritising key infrastructure projects”.
Following the latest survey LCCI makes four key recommendations:
- Given the capital’s reliance on foreign labour, it is vital that London will get the flexible migration system it needs post-Brexit. The Mayor should bring London’s civic and business leaders together to design practical proposals for future migration.
- A fundamental review of the business rates system to ensure the tax remains fit for purpose in today’s digital age. Additionally, as business rates are devolved to London, businesses should be consulted on an appropriate mechanism to ensure future rates are fair and to decide on the allocation of funds.
- The government should commit to progressing London Strategic Infrastructure Projects (LSIPs) including Crossrail 2, fixed river crossings in East London and a new runway at Gatwick after Heathrow.
- The government should move rapidly to grant devolution of 16-18 skills provision, vocational capital investments, careers information, advice and guidance, as well as the apprenticeship levy, starting with unspent levy funds.
Key findings from the Capital 500 Q3 2018 survey include:
Domestic and export demand:
- More businesses reported an increase than a decline in export demand in Q3 2018, while 35% of respondents said they had been exporting during the past 3 months (down 5 points on Q2 of this year).
- Q3 2018 recorded an uptick in domestic demand figures, although figures remained in negative territory for the fifth consecutive quarter as more businesses recorded a decrease than a rise in domestic demand.
- During Q3 2018, the Capital 500 employment balance increased by one point and has now been in negative territory for 9 consecutive quarters.
- Capital 500 businesses were more optimistic about their future employment balance than in previous quarters, with, on balance, 7% of firms expecting their staff numbers to rise over the next three months (up 1 point on last quarter), the highest figure since Q2 2016.
Recruitment and training:
- The percentage of companies looking to recruit over the last three months stayed unchanged at 15%. Of those trying to recruit, 55% encountered difficulties, down 5 points on last quarter.
- In Q3 2018, the balance figure for companies looking to invest in training remained stable at +2%. While the balance for larger businesses dropped by 2 points to +12%, the figure for micro businesses was 0%.
Business costs and prices:
- The balance figure for the proportion of firms who expected to raise their prices over the next three months was +18%, down 5 points on Q2.
- The balance figure for the cost of raw materials sourced internationally fell to its lowest point since Q2 2016 at +21%.
Cashflow and investment:
- The balance figure for cashflow remained in negative territory at -2%, despite a 3 point increase on Q2. The figure has now been negative for ten consecutive quarters, with a significantly higher balance for larger businesses (+21%) than micro businesses (-5%).
- A 1-point uptick was recorded in the capital investment figure in Q3 2018, lifting it out of negative territory.
- Q3 2018 saw each of the Capital 500 business confidence indicators fall or remain stable.
- The Capital 500 balance figure for overall company prospects dropped by 4 points back into negative territory as more businesses reported a decline than an improvement in their expectations. It has now been 10 quarters since the figure was in positive territory.
- Expectations for both the London and UK economy continued to fall and have now been negative for respectively nine and ten consecutive quarters.
- On balance, inner London businesses remained more pessimistic about the London economy (-18%) than their outer London counterparts (-13%).
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NOTES TO EDITOR:
- Colin Stanbridge is available for further comment and interview.
- 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 business survey, conducted by regional chambers of commerce across the UK every quarter.
- 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.
- In Q3 2018 ComRes surveyed a total of 517 London business leaders between 14 August and 11 September 2018. 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
- 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.
- Read the full report here
- Follow the discussion on Twitter using #Capital500