Tuesday 10 April 2018
Urgent action needed as business confidence falls again says London Chamber of Commerce and Industry
Businesses urgently need practical help to ensure continued growth in a wide range of areas including infrastructure, skills, planning and Brexit following the findings of a new economic survey released today.
The survey of more than 500 London businesses, carried out by ComRes on behalf of the London Chamber of Commerce and Industry (LCCI), found that not only had export demand levels reached the joint lowest recorded level of the survey, but also that business confidence levels had not been this low since the first poll after the EU referendum vote in 2016.
As a result LCCI has called on both the Mayor and the Government to do more to turn these figures around including building fixed river crossings in East London to ease congestion and unlock housing potential, as well as deliver a Brexit transition period of up to five years.
Chief Executive of LCCI, Colin Stanbridge said: “These figures suggest at best a challenging quarter for London firms.
“The business confidence indicators continued to decline to a worrying level, and economic outlook figures have been in negative territory now for over a year.
“Notwithstanding any impact that the transition agreement might have had on business sentiment, there are things that can be done to turn these figures around and give a boost to confidence in the capital’s economy.
“It is vital these actions are taken in order to reverse the worrying trends we have seen for too long.”
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: Mayor Khan’s plan for one new East London road crossing at Silvertown is not enough. Proposals for fixed river crossings at Gallions Reach and at Belvedere – which include a public transport element – should be revisited to maximise growth potential in East London.
Recommendation 2: The Mayor must continue to work with London businesses to ensure they are consulted on skills provisions for Londoners. This includes seeking business input to help tailor the administration of the Adult Education Budget when it is devolved to London from 2019/20.
Recommendation 3: Through the review of the London Plan, the Mayor of London should seek to secure permanent exemption beyond 2019 for Tech City and the Central Activities Zone from permitted development rights to protect vital work space.
Recommendation 4: The proposed transition period of 21 months – or just over 90 weeks – may not give many SMEs the time needed to adequately model the impact of potential new tariffs, assess potential non-tariff barriers, identify, recruit and induct any new staff required to process the changes, and order and install new plant, machinery or software. More time is needed to allow firms to plan for any potential changes.
Key findings from Capital 500 Q1 2018 survey include:
Domestic and export demand:
- During Q1 2018, domestic demand figures declined for the third consecutive quarter and remained negative overall, as more businesses reported a drop than a rise in their domestic sales and orders.
- In Q1 2018, the Capital 500 export demand figures reached their joint lowest recorded level.
- The Capital 500 employment balance for the past three months remained in negative territory for the seventh consecutive quarter – a series that began with the first survey after the EU referendum in June 2016.
- However businesses’ expectations for the next three months stayed positive, with on balance 4% of Capital 500 companies expecting their employment levels to rise – up 1 point on Q4 2017.
Recruitment and training:
- The balance figure of companies looking to invest in training reached its second lowest recorded Capital 500 level, as on balance 1% of respondents reduced their planned investment, down 2 points on Q4 2017.
- The percentage of companies looking to recruit also reached its second lowest recorded level at 13% (from 15% last quarter); of these, 65% recruited for full-time and 40% for part-time positions.
- Of companies trying to hire new staff, half (51%) encountered difficulties, which is less than in the previous two quarters (57% and 60% respectively). Skilled manual/technical positions continued to be the hardest to fill for recruiting companies (63%), followed by professional/ managerial positions (40%).
- The balance figures for the cost of borrowing (+18%) and the cost of raw materials sourced domestically (+30%) reached their highest recorded Capital 500 level, while the balance of the cost of raw materials sourced internationally (+24%) stayed lower than for domestic materials (+30%).
- The figures for the cost of energy and the cost of fuel continued to be the highest of all analysed costs at respectively +39% (up 8 points) and +40% (up 2 points)
- The cost pressure of employees to increase wages rose by 3 points to +21%.
Cashflow and investment:
- While the cashflow figure has now been in negative territory for eight consecutive quarters, capital investment turned negative for the first time since Q4 2016.
- The capital investment balance dropped by 4 points to -4%, as fewer businesses increased than decreased their planned investment in plant and equipment. The cashflow balance rose by 2 points on last quarter but stayed negative at -7%.
- All Capital 500 business confidence indicators have now reached their lowest recorded level since Q3 2016.
- The balance figure for overall company prospects dropped for the fourth consecutive quarter to -10%, as more businesses expected their performance to worsen than improve.
- During Q1 2018, expectations for both the London economy and the UK economy rose compared to last quarter, while the overall figures continued to be negative on balance.
- The balance for expectations of the London economy rose by 5 points to -21%, while expectations of UK economic growth went up by 4 points to -26%.
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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 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. ComRes surveyed a total of 561 London business decision makers online between 15 February and 15 March 2018. All data has been weighted to be representative of all London businesses by company size and broad industry sector.
5. ComRes is a member of the British Polling Council. Full data tables are available at www.comresglobal.com
6. 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.
7. Read the full report here
8. Follow the discussion on Twitter using #Capital500