Tuesday 8 October 2024

London businesses experienced a significant increase in optimism about the state of the economy and sales in Q3 2024, according to the Capital 500, London’s quarterly economic survey (QES) conducted by the London Chamber of Commerce and Industry (LCCI). 

Four in ten businesses (39%) now anticipate economic growth in the capital over the next 12 months, up from 35% who said the same in the Q2 QES. Domestic demand for London businesses also showed encouraging growth in Q3, with the percentage of firms that reported an increase in demand (compared to those reporting a decrease) climbing from +2 to +6 in Q3 2024. 

Following this positive trend, labour market figures for London businesses continued to improve. 13% of London businesses reported an increase in their workforce size since last quarter, one of the highest levels since 2021. Firms also expressed greater optimism about future workforce growth, with 26% expecting their workforce to increase in size over the next quarter, up from 23% who reported the same in Q2. 

Business cost pressures eased during Q3 2023, although most businesses still said their fuel, energy, raw material and wage costs continued to increase. Just over half (52%) of companies reported their energy costs had risen in Q3, down from 58% in Q2, marking the lowest share reporting an increase from quarter to quarter since Q3 2021, before the energy price shock. Just under one in ten (8%) of London firms said their energy costs had fallen over the previous three months in Q3, the biggest proportion since Q1 2021, although this remains a relatively small number. 

Finally, confidence in business operations remained high in Q3 2024, despite a small decline in some of the QES indicators. The net balance for profitability dipped 7 points to +30 last quarter, with 47% of firms expecting their profitability to increase in the coming 12 months, down from 52% in the Q2 QES. Perhaps anticipating the impending Budget, there was a slight increase in the percentage of businesses that said they expect profitability to worsen (17% in Q3, 15% in Q2). 

Optimism and expectations about profitability and turnover were split based on business size; larger companies (250+ employees) were more optimistic on profitability (64% expected an increase in the next quarter) compared with micro businesses (0-9 employees), where the figure was 45% in Q3. 

Other key findings include: 

• 26% of London businesses reported an increase of domestic sales last quarter, with 22% seeing an increase in domestic orders. 
• 10% of London businesses reported an increase in export sales last quarter, with the same amount (10%) seeing an increase in export orders. 
• London businesses pointed to a pick-up in labour market activity during the third quarter of 2024. The employment balance – which measures reported workforce levels in the past three months – rose 2 points to -1 in Q3, the highest level since Q2 2022.
• 29% of firms in the capital reported an increase in cashflow last quarter, with 18% of firms reporting an increase in investment in plant and equipment. 

On the findings of the report, Karim Fatehi MBE, Chief Executive of the London Chamber of Commerce and Industry (LCCI), commented:

“It’s encouraging to see businesses expressing a heightened sense of optimism about their future prospects and the overall economy, reflecting a more positive outlook than we have seen in recent years. Nevertheless, as we approach the impending budget, the latest findings from the Q3 Capital 500 highlight an urgent need for the government to provide reassurance to the business community through the long-term stability essential for sustained growth.   

“The upcoming Budget represents a pivotal moment for the UK. It offers politicians the chance to redefine the economic narrative and introduce policies which will secure long term growth and prosperity for the UK. 

“All eyes will be on the Chancellor at the end of this month as businesses call for reforms to the business rates system, better skills and immigration policies and strengthened relationships with key international trading partners. By listening to businesses and addressing these key policy issues, the government will foster an environment of confidence which will drive investment and innovation throughout London and the rest of the UK.”

Read the full Capital 500 report.

ENDS

Notes to Editors

• Savanta surveyed a total of 514 London business leaders between 30 July and 30 August 2024. All data were weighted to be representative of all London businesses by company size and broad industry sector. Savanta is a member of the British Polling Council and abides by its rules. Full data tables are available at www.savanta.com.
• It is worth noting that the fieldwork for this quarter’s QES was undertaken just after Chancellor Rachel Reeves’s speech on 29 July 2024, where she announced some immediate cuts to public spending.