London business is more buoyant about the UK’s prospects for growth than at any time since 2010, according to research that bolsters indications of a sustained economic recovery.
Optimism about the economy over the next six months has jumped to 69 per cent from 56 per cent among companies in the capital, according to a quarterly survey of business by the CBI employers’ organisation and KPMG, the professional services group.
The survey, which was conducted in October, follows official figures this month that revealed London’s increasing dominance of the UK economy. Between 2007 and 2012, London expanded far faster than the rest of the country, its output rising by 15.4 per cent against 8.5 per cent across the UK, data from the Office for National Statistics showed.
Half of businesses surveyed were positive about their trading prospects – up from 40 per cent three months ago – while the proportion who were pessimistic fell from 6 per cent to just 1 per cent.
The brighter outlook is reflected in companies’ intentions to pursue exports and expansion. Some 73 per cent were planning on expanding over the next year against 67 per cent in the last survey. Two-thirds plan to expand in London or the UK, with 47 per cent looking overseas for a boost in sales.
Sara Parker, CBI director for London, said: “As the recovery begins to gain traction, London firms’ optimism levels have jumped. Improving confidence about the economy is feeding through into upbeat expansion plans.”
London’s businesses are already heavily engaged abroad. Some 88 per cent of the 134 companies responding do business in Europe, while 69 per cent trade in China and 64 per cent in India.
Asked what factors were most important in helping them reach new overseas markets, some 65 per cent of respondents listed a better regulatory environment, while 42 per cent gave promotion of London and the UK internationally.
The visa system remains a hot issue among business, with 39 per cent saying more needs to be done to improve arrangements for bringing over high-skilled migrants.
Richard Reid, London chairman for KPMG, said investment in skills had to be as high a priority as infrastructure – another top concern of business – if London was to hold its own against rivals in cities such as Shanghai and Mumbai.
“Access to a wide talent pool is vital in keeping our businesses growing, and the supply of skilled staff in London is fast becoming a major stumbling block in keeping us competitive,” he said.
He added that businesses needed be more aware of initiatives offered by UK Trade and Investment, the government’s trade promotion agency, to help them win business abroad.
The sense of optimism in the report has not translated into a recruitment drive. Some 70 per cent of companies were only hiring “where essential” and 20 per cent had frozen recruitment – similar to figures in the previous survey.
More companies are using redundancies to shed workers, with the proportion rising to 33 per cent from 21 per cent three months ago.
Professional services made up 30 per cent of the businesses surveyed by KPMG and the CBI, with banking and finance at 16 per cent and information or technology businesses at 8 per cent. Companies with turnover of more than £1bn accounted for 46 per cent of responses, with 35 per cent from FTSE 100 companies.
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