"No room for complacency" message from largest post-referendum survey of London economy

Thursday 6 October 2016

"No room for complacency" message from largest post-referendum survey of London economy

Businesses need solid reassurance from the Government following the Brexit vote, a new economic survey by London Chamber of Commerce and Industry (LCCI) and ComRes has shown.

The Capital 500 - London's largest regular business survey -- found that in line with decreases seen in all indicators of companies' performance over the last two quarters, expectations for the next 12 months continued to deteriorate to Capital 500 record lows. On balance, 9% of London businesses expected their overall company prospects to decline, moving into negative territory for the first time and down a record 22 points on last quarter.

To bolster business confidence in a time of uncertainty, LCCI has called for immediate and direct investment in strategic infrastructure as well as addressing ongoing domestic issues including the impact of the forthcoming business rates revaluation and introduction of the Apprenticeship Levy.

Chief Executive of London Chamber of Commerce and Industry Colin Stanbridge said: "London businesses are taking a pragmatic and level-headed approach to the Referendum outcome. The result may have been unsettling for some, but we are not seeing any sense of panic.

"There is clearly no room for complacency as we take the first steps towards a post-Brexit future.  It is of vital importance that Government takes steps to reduce uncertainty, and boost business confidence in the short term.  For London, that means investing in strategic infrastructure and addressing issues such as recruiting and retaining skilled staff in a post Brexit-era."

LCCI makes four key recommendations following the latest survey to help the Mayor and the Government rebuild London business confidence:

- Recommendation 1: A cross-Whitehall national strategy for exports growth could co-ordinate relevant departmental policies and outline the role that businesses and private providers could play in an integrated effort to target support to greater numbers of UK firms, particularly SMEs, looking at overseas markets.

- Recommendation 2: The Government should ensure Apprenticeship Levy funding can be used to support other high quality workplace and vocational training and large employers should be able to transfer their electronic vouchers to smaller firms in their supply chain.

- Recommendation 3: The Mayor of London should work with business groups to assess the potential impacts of significant new ratings on London businesses across differing boroughs and across various sectors.

- Recommendation 4: The forthcoming Autumn Statement provides an opportunity for Government to boost business confidence by moving strategic London transport infrastructure like Crossrail Two or a new runway to "next stage" while targeting public sector investment to attract private finances to support future infrastructure projects.

Key findings from Capital 500 Q3 2016 survey include:

- Domestic demand declined during Q3 2016, with both sales and orders reaching their lowest recorded Capital 500 level. Already in negative territory, the balance for domestic sales fell by 8 points since last quarter, as on balance 9% of London businesses reported a decrease in domestic sales. The balance figure for domestic orders decreased by 7 points to -11%.

- Export demand also continued to decline, but despite falls in both export sales and orders, both balance figures remained in positive territory. Q3 2016 saw a 2 point fall in the balance for export sales, which is now at its lowest recorded Capital 500 level, as on balance 1% of London businesses reported an increase in export sales.

Labour market:

- Q3 2016 saw the lowest recorded Capital 500 employment levels, with 6 % of London businesses, on balance reporting decreased employment over the last three months, down 8 points on last quarter

- Expectations for the next quarter also continued to decline, as 2% of businesses, on balance, expected their workforce to increase, a 7 point decline on Q2 2016.

Recruitment and training:

- A record low number of Capital 500 companies were planning to invest in training or looking to recruit during the past three months. Plans for investment in training continued to decline, with 3% of companies, on balance, decreasing investment plans, down 7 points on last quarter. 13% of companies were looking to recruit during Q3 2016, down 4 points on Q2 2016.

- Of the companies looking to recruit, half (51%) encountered difficulties finding sufficiently skilled candidates.

Business costs:

- The cost factor that, on balance, increased the most during Q3 2016 was the cost of raw materials.

- In contrast, the balance figures for the cost of borrowing (down 9 points to +1%) and the pressure from employees to increase wages (down 5 points to +14%) declined considerably during Q3 2016.

Cashflow and investment:

- Capital 500 companies' cashflow position continued to decline during Q3 2016, with 7% on balance reporting a decrease, down 5 points on last quarter.

- Larger businesses reported higher balance figures for both cashflow (0%) and capital investment (+10%), than micro businesses, which reported figures of -9% and -7% respectively.

Business confidence:

- Expectations for the next 12 months continued to deteriorate to Capital 500 record lows. On balance, 9% of London businesses expected their overall company prospects to decline, moving into negative territory for the first time and down a record 22 points on last quarter.

- While micro businesses were, on balance, pessimistic about their company prospects (-11%), larger businesses were slightly more upbeat (+1%). On the same measure, businesses based in Inner London continued to report a lower figure (-12%) than businesses based in Outer London (-7%).

Economic outlook:

- Expectations for both the UK and London economy remained on a downward trajectory, now for the fifth consecutive quarter, and firmly into negative territory. On balance, 39% of Capital 500 companies expected UK economic growth to weaken, down a record 34 points on Q2 2016. Expectations for London's economy were down 31 points, as 23% of Capital 500 companies on balance expected a decline.

- The UK's economic prospects were, on balance, more often perceived to be negative by micro businesses (-41%), than larger businesses (-24%). Businesses based in Outer London were more pessimistic about the UK's growth prospects (-45%), than businesses based in  Inner London (-33%).


Media contact
Katharine McGee
T: +44 (0)20 7203 1897                     
M: +44 (0)7827 241528
E: kmcgee@londonchamber.co.uk

1. Colin Stanbridge is available for further comment and interview.
2. ComRes interviewed 504 London business leaders between the 3rd  - 31st August 2016. All data was weighted to be representative of all London businesses by company size and broad industry sector.
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 over the last two years.
5. Comres is a member of the British Polling Council and abides by its rules.  Full data tables are available at www.comresglobal.com
6. The balance figures representative the percentage of firms that reported an increase minus the percentage that reported decrease.
7. Follow the discussion on Twitter using #Capital500