Wednesday 11 October 2017

Action needed to address negative business outlook says London Chamber of Commerce

London business leaders continue to express negative sentiment about the UK economy, the latest survey from London Chamber of Commerce and Industry (LCCI) has found.

The business organisation has called on the Government to urgently address issues such as securing funding for Crossrail 2 as well as recognising London's economic importance in any new UK immigration policy through a new 'London Shortage Occupation List'.

LCCI believes this would enable employers to better respond to acute shortages in specific professions and key sectors throughout the capital.

The Capital 500 Quarterly Economic Survey (Q3) conducted for LCCI by polling agency ComRes also found that more companies were struggling to recruit than since the Capital 500 began three years ago.

Chief Executive of LCCI, Colin Stanbridge said: "What has been made evident is that businesses are still grappling with the uncertainties caused by turbulence in today's political and economic environment, including Brexit and rising inflation.

"Action must be taken to boost declining confidence amongst the capital's business community by strengthening the foundations of London's economy.

Our politicians have an opportunity to now grasp the nettle and take a positive funding decision on Crossrail 2, secure affordable business work space in the forthcoming London Plan Review and agree additional devolutionary policy competencies for the capital.

"Moreover, with a record high number of recruiting companies having difficulties hiring new staff and uncertainty about what the UK's future immigration system will look like, it would be prudent to provide London with a new, separate Shortage Occupation List (SOL) responsive to its particular needs."
LCCI makes four key recommendations to ensure London businesses are better equipped for the future.

Recommendation 1: Government should use the Industrial Strategy to support growth by recognising the benefits of greater devolution of policy competencies - including finance, transport and skills - to City Hall.

Recommendation 2: London's economic importance should be recognised in any new UK immigration policy through provision of a separate Shortage Occupation List (SOL) similar to what Scotland has. This would enable employers to better respond to acute shortages in specific professions and key sectors throughout the capital.

Recommendation 3: The Mayor of London must use the forthcoming review of the London Plan to secure long-term protection of business work space across the capital, including addressing the impact of Permitted Development Rights use - especially in the Central Activities Zone.

Recommendation 4: Sustained investment in transport infrastructure is needed across the UK. In London, a funding solution must be swiftly secured for Crossrail 2 to advance project design and underpin efforts to secure the necessary powers to begin construction.

Key findings from Capital 500 Q3 2017 survey include:

During Q3 2017, the Capital 500 domestic demand figures turned negative again, following a rise in the previous quarter.

Export demand figures remained positive during Q3 2017, but with differences between export sales and export orders.

The export sales balance remains positive at +3%, continuing its rise since the first quarter of 2017. The balance for export orders fell by 2 points to +1% following an increase seen in the previous quarter.

Labour market:

• Although the Capital 500 employment balance continued to rise during Q3 2017, it stayed in negative territory for the fifth consecutive quarter.

• Expectations for the next three months increased by 2 points on Q2 of this year, with on balance +5% of businesses expecting to expand their workforce.
• While the employment balance for micro businesses remained negative, the figure for larger businesses went up by 10 points, to +10%.

Recruitment and training:

• During Q3 2017, the balance figure of companies looking to invest in training continued to decline, although it remained positive overall.
• On balance, 1% of Capital 500 companies were looking to invest in training, down 2 points on last quarter.

• 13% of Capital 500 companies tried to recruit during Q3 2017, down 5 points on last quarter. Of these, three quarters (75%) recruited for full time roles and almost a third (30%) for part time roles.

Business costs:

• It was again a mixed picture in terms of business costs for Q3 2017.
• While the balance figure for the cost of raw materials sourced domestically, fell by 6 points on last quarter (to +23%), the cost of raw materials sourced internationally saw a 3 point rise (to +27%).

Cashflow and investment:

• While Capital 500 businesses' capital investment continued to be positive, the cashflow balance remained negative overall.
• The cashflow balance stayed unchanged from Q2 2017, as a negative figure (-3%) was recorded for the sixth consecutive quarter. In contrast, 2% of businesses, on balance, planned to increase their investment in plant and equipment (down 1 point on Q2).

• For larger businesses, the cashflow balance declined from +12% to 0%, while for micro businesses, it remained unchanged at -4%.

Business confidence:

• All business confidence indicators declined during Q3 2017.
• Overall company prospects fell for the second consecutive quarter, with, on balance, 7% of businesses expecting their overall performance to worsen - down from -3% in Q2 of this year.

Economic outlook:

• Expectations of both the London and the UK economy remained more or less unchanged from last quarter, and continued to be in negative territory overall.
• The balance figure for expectations of London's economy remained the same as in Q2 2017 at -21%, while the balance figure for the UK economy improved by just one point to -28%.
• Both figures have now been in negative territory for five consecutive quarters (since the first Capital 500 poll after the vote to leave the EU).

ENDS

Media contact
Katharine McGee
T: +44 (0)20 7203 1897
M: +44 (0)7827 241528
E: kmcgee@londonchamber.co.uk

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 interviewed 569 London business leaders between 8 August and 5 September 2017. All data was 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.uk
6. The balance figures represent the percentage of firms that reported an increase minus the percentage that reported decrease.
7. Follow the discussion on Twitter using #Capital500
8. View the full report here