Wednesday 12 July 2017
The Government must address dipping business confidence with positive Brexit talks without ignoring domestic agenda warns LCCI
Positive Brexit talks and a commitment to invest in the both the capital's infrastructure and skills are vital for business confidence and security a new report has found.
In its Quarterly Economic Survey report, London Chamber of Commerce and Industry (LCCI) said minimising trade barriers post Brexit, ensuring the work force is equipped for the future and committing to major infrastructure projects must be prioritised alongside each other if London is to prosper.
The report found that although business performance is improving in most areas, confidence in the future is falling, and more than half of those looking to employ staff were finding it difficult to recruit sufficiently skilled candidates.
The QES report for Q2 was conducted in partnership with leading polling agency ComRes, and is the first since the recent general election and year anniversary of the Brexit referendum.
Chief Executive of LCCI, Colin Stanbridge said:
"Now is the time to boost confidence amongst the capital's business community. This means receiving positive signals from early Brexit negotiations that business concerns are being heard, including on the importance of 'frictionless' trade and ongoing access by UK companies to workers from overseas.
"It also requires concrete steps to address the capital's pressing domestic priorities, including making sure young Londoners have the right skills to succeed in the jobs of tomorrow, that the capital's pressing 'megacity' infrastructure needs are met, and that rising business costs are addressed before they undermine competitiveness"
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: Avoiding additional barriers to trade post-Brexit must be a top priority for negotiations with the EU. If customs procedures between the UK and EU are reintroduced, an enhanced system for clearing customs that allows pre-clearance away from the ports of entry must be designed and adequately resource.
Recommendation 2: The new government should guarantee high-quality work placements for students pursuing a technical route and prioritise new 'T-Levels' in Construction and Digital areas to help meet the demands of the UK industry and support young people into long-term sector careers.
Recommendation 3: The government should expedite a fundamental review of business rates to ensure the tax remains fit for purpose in today's digital age, and so businesses in London are not taxed disproportionally.
Recommendation 4: 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
Key findings from Capital 500 Q2 2017 survey include:
- Domestic demand figures are now back in positive territory for the first time since Q1 2016, as more businesses reported an increase than a decrease in both domestic sales and orders.
- While the balance figure for export sales saw a 1 point rise, the export orders balance increased by 3 points. This is the first time the figures have gone up since Q1 2016, and the balances are now back in positive territory for the first time since Q3 2016.
Labour market:
- Coming from a Capital 500 record low at -6%, the balance figure for business' employment levels over the past three months rose by 3 points during Q2 2017, but stayed negative overall.
- Expectations for the next three months remained unchanged, as on balance, 3% of businesses expect their workforce to grow.
Recruitment and training:
- 18% of Capital 500 companies were trying to recruit during Q2 2017, up 7 points on last quarter - the biggest rise since Q1 2016. 62% recruited for full time positions (down 3 points) and 38% for part time positions (up 5 points).
- Of the companies looking to recruit, half (52%) encountered difficulties finding sufficiently skilled candidates - up from 47% in Q1.
Business costs:
- In terms of business costs, Capital 500 businesses reported a mixed picture for Q2 2017.
- The balance figure for the cost of raw materials sourced domestically reached its highest recorded level at +29%, following a 1 point rise on last quarter.
- At +24%, the balance for the cost of raw materials sourced internationally continued to be lower than for domestic materials, down 1 one point on last quarter.
Cashflow and investment:
- The cashflow balance increased by 6 points on last quarter, but remained negative overall, as on balance, 3% of businesses reported a decline in cashflow.
- In contrast, a positive balance was reported for investment in plant and equipment, as 3% of businesses, on balance, planned to increase their capital investment.
Business confidence:
- While turnover and profitability expectations remained positive during Q2 2017, overall company prospects declined.
- On balance, 11% of Capital 500 businesses expected a rise in their profitability over the next 12 months (up 3 points on Q1) and 14%, on balance, expected the same of their turnover (down 1 point on last quarter).
- In contrast, a negative balance was reported for overall company prospects, as, on balance, 3% of businesses expected their economic prospects to worsen - down from 0% in Q1 of this year.
Economic outlook:
- Expectations of both London and the UK economy declined again during Q2 2017, and remain negative overall.
- Following an uptick in the previous quarter, the balance figure for expectations of London's economy dropped by 19 points to -21%, and the balance figure for the UK economy dropped by 21 points to -29%. Both figures have now been in negative territory for four consecutive quarters, and have reached their second lowest recorded Capital 500 level.
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 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 530 London business leaders between 23 May and 19 June 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