Tuesday 6 January 2015

Business confidence holds steady, despite difficulties in recruiting

With five months until the General Election, 42% of London firms expect UK economic growth to improve over the next year, according to the capital's largest and most authoritative business survey - the London Chamber of Commerce & Industry's Capital 500.

Published today (6th January), the Capital 500 survey of London business leaders with ComRes covers the fourth quarter of 2014 and provides a timely temperature check of the capital's business outlook.

While the final quarter of 2014 saw marginal declines across several indicators, the mood of London business remains confident, with 37% expecting an improvement in their business prospects for the next 12 months and only 12% expecting a deterioration.

The crucial pressure point for businesses in the last three months of 2014 appears to be recruiting adequately skilled staff, with more than half (52%) of businesses who looked to recruit in the past three months reporting difficulties in hiring skilled staff, a 7 percentage point increase on Q3 2014. 49% of these businesses struggled to recruit skilled manual and technical staff; 42% had difficulties finding people to fill professional and managerial vacancies.*

However, despite these growing difficulties, firms are not investing as much in training up existing staff. Only 11% of businesses increased staff training budgets in the last three months, with 8% decreasing training investment.

Colin Stanbridge, Chief Executive of London Chamber of Commerce (LCCI), said: "As we approach the General Election, today's results provide a much-needed temperature check of London business sentiment.

"While London business leaders remain largely confident about their own business prospects and that of the UK economy, a growing skills gap could put growth prospects in jeopardy. In order to help businesses to recruit the skilled workers they need, we urge government to extend funding for apprenticeships for 19-23 year olds to expand the availability of available workers.

"Sluggish reported growth in exporting also remains a concern. Despite the increased support for first time exporters announced in the Autumn Statement, it is imperative that cross-governmental support is developed to help businesses to export. It is key that the Home Office look to reduce visa restrictions on overseas business visitors, to help develop relationships with overseas markets.

"It is worth noting that London businesses expect the capital to continue to drive UK economic growth, with 47% expecting London's economy to grow as opposed to 42% expecting UK economic growth to improve."

CEBR Chief Econimist, Vicky Pryce, panellist at the launch of the Capital 500 said: "It is great to see confirmation that London firms are powering ahead, but confidence can be derailed by external factors such as weaker export demand and increasing business costs. It is important for confidence to be maintained both for the good of the capital but also for the rest of the UK, in the run-up to the General election and beyond."

Key findings from the Capital 500 survey include:

• Domestic demand: 21% of London businesses reported increased domestic sales; 19% reported a decrease. Balance figure: +2%
• Export demand: 8% reported an increase in export sales; 5% reported a decrease. Balance figure: +3
• Labour market: 82% of firms reported no change in employment levels; 9% reported an increase in employment levels; 9% reported a decrease. Neutral balance figure
• Workforce size: 83% of businesses expect no change to their workforce size in the next quarter; 13% expect workforce size to increase; 4% expect it to contract
• Recruitment & training: 16% of firms sought to recruit over the last quarter (7 percentage point decrease on previous quarter); 52% of firms who tried to recruit reported problems recruiting workers; 11% of firms' investment in training increased in the last quarter; 8% saw a reduction in training spend. Balance figure: +3% (6 percentage point decrease on previous quarter)
• Cashflow & investment: 25% of firms reported an increase in cashflow over the past three months; 20% reported a decrease. Balance figure: +5%. Only 11% of firms reported an increase in investment in plant and equipment; 8% reported a decrease. Balance figure: +3% (7 percentage point decline on previous quarter)
• Business costs: the following percentage of firms reported increases in business costs

o Energy: 35%

o Raw materials (domestic): 27%

o Fuel: 25%

o Pressure from employees to increase wages 24%

o Raw materials (international): 17%

o Borrowing: 10%

Business concerns: firms reported to be more concerned by issues than three months ago, by the following percentage points:

o Competition: 40%

o Interest rates: 22% (10 percentage points lower than previous quarter)

o Inflation: 22%

o Business rates: 18%

Business confidence: 37% of firms expect an improvement in their business prospects over the next 12 months; only 12% expect a decline. Balance figure: +25%. 41% of firms expect their business's turnover to increase over the next year; only 16% expect turnover to decline

• UK Economic outlook: 42% of businesses expect UK economic growth to improve; 13% expect it to worsen. Balance figure: +29% (7 percentage points lower than the last quarter)
• London economic outlook: 47% of businesses expect the UK economy to improve; 8% expect it to worsen. Balance figure: +39% (2% higher than the last quarter)

ENDS

Media contact:
Jo Hooper, Press & Media Relations Manager
T: +44 (0)20 7203 1897
M: +44 (0)7827 241528
E: jhooper@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. ComRes interviewed 518 London business decision makers between 6th November and 26th November 2014. 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. Data tables are available on the ComRes website, www.comresglobal.co.uk
4. *from a base of 64 respondents.