Thursday 1 October 2015

London businesses report slight dip in confidence in prospects

• Decline in business confidence and turnover expectations
• Dip in confidence in London's growth prospects
• 5 point decline in firms recruiting for new staff compared to last quarter

London business leaders' confidence in the capital's economic growth prospects has dipped, with a 16 point decline in the balance figure for firms expecting the London economy to grow in comparison to the previous quarter. This is according to new research from London Chamber of Commerce and Industry (LCCI).

The Capital 500 survey of London's business leaders, conducted by ComRes for LCCI between 18th August and 7th September, found that although businesses' cashflow positions had improved and that firms were generally upbeat about their own prospects, dips in confidence levels and a continuing struggle to recruit may indicate an underlying concern about the state of the UK and world economies.

Businesses also reported continuing struggles to recruit, including for skilled and managerial staff. Although there was a 5 point decline in the proportion of businesses saying that they had looked to hire staff in the last three months, 49% of those who did look to hire confirmed that they struggled to find the staff they needed. This is now an entrenched issue, which we have seen across the last three quarters.

It was also telling that almost a quarter (23%) of firms said that pressure to increase wages had increased in the past three months.

Commenting on the figures, London Chamber of Commerce and Industry Chief Executive, Colin Stanbridge, said: "While many indicators remain in positive territory, it appears we may be seeing a correction of a post-election bounce in confidence figures. With concerns growing over the health of the global economy, coupled with an uncertain period ahead for London as we look towards the election of a new Mayor in May next year, London businesses need certainty from Government.

"We would not want to see any rise in interest rates until well into 2016, to give businesses greater certainty around borrowing costs - a quarter (24%) of firms told us that they were more concerned about interest rates than they were last quarter. We are also calling on Government not to impose any further restrictions on employing non-EEA migrants, so that firms can fill the ongoing skills gap without additional red tape and rising costs.

"We would also renew our call to Government not to leave London out of the race for UK devolution - a fiscal devolution pilot in London would give the capital the financial freedoms it needs to plan for London's growth and secure investment in the key infrastructure projects that would future-proof our capital."

Key findings from Capital 500 Q3 2015 survey include:

• Domestic demand: 20% of business leaders reported an increase in domestic sales over the last three months, 17% reported a decrease. Balance figure: +3%
• Export Demand: 8% reported an increase in export sales; 5% of firms reported a decrease. Balance figure: +3% (one point increase on Q2)

Labour market:

• 84% of Capital 500 businesses reported no change in employment levels; 8% of firms increased employment levels, and 8% decreased them. Balance figure: 0% (four points above Q2 2015)
• 12% of Capital 500 firms expect their workforce to increase in the next three months; 2% anticipate workforce size to decrease. Balance figure: 10% (two point decrease on previous quarter)

Recruitment and training:

• 15% of business leaders looked to hire new staff during previous three months (five point decline on Q2)
• 65% of roles advertised were full time positions; 31% of roles were for part-time positions
• 49% of firms that looked for new staff in the last three months encountered difficulties recruiting
• 43% of those who had difficulties struggled to fill skilled manual or technical staff; 37% experienced problems hiring professional or managerial staff
• 9% of companies increased their training budgets in the last three months; 6% reduced them. Balance figure: +3%

Business costs:

• Increased cost pressures: 23% - Wages; 20% - Energy; 16% - raw materials (domestic); 14% - Fuel; 11% - raw materials (international); 10% - borrowing
• 34% of firms said competition was a greater concern to their business than three months ago. 24% were more concerned about interest rates than Q2; 13% were more concerned about inflation

Cashflow and investment:

• 60% of firms reported no change in cashflow position; 20% reported an increase; 20% reported a decrease. Balance figure: 0%
• 12% of firms reported an increase in capital investment plans (in plant and equipment); 7% reported a decrease. Balance figure: +5% (two point increase on Q2)

Business confidence:

• 33% of business leaders expected their firms' prospects to improve over the next 12 months; 9% anticipated a decline. Balance figure: +24% (seven point decrease on Q2 figures)
• 39% of firms expected turnover to increase over the next 12 months; 14% expected a reduction in turnover. Balance figure: +25% (four point decrease on Q2)

Economic outlook:

• 41% of firms expect UK economic growth to improve over the next 12 months; 15% expect it to contract. Balance figure: +26% (12 point decline on Q2)
• 40% of firms expect London's growth prospects to improve over the next 12 months; 10% predict a decline. Balance figure: +30% (16 point decline on previous quarter)

ENDS

Media contact
Sophie Mew, Policy & Public Affairs Officer
T: +44 (0)20 7203 1897
M: +44 (0)7827 241528
E: smew@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 514 London business leaders between 18 August and 7 September 2015. All data was weighted to be representative of all London businesses by company size and broad industry sector.
4. Comres is a member of the British Polling Council and abides by its rules. Full data tables are available at www.comresglobal.com