London businesses are more optimistic about the economy over the next six months than they have been since 2010, according to aBusiness Survey conducted by KPMG/CBI. The survey, conducted quarterly, shows a leap in confidence from 56% to 69% and is being fueled by rock bottom interest rates and falling inflation in last 4 years. Capping of business rates at 2% has also boosted the confidence of businesses across the capital.
Fifty per cent of businesses were positive about their trading prospects (up by 10% from the previous survey) while pessimism fell to just 1% from 6% 3 months earlier. This survey observes however that firms had not changed their opinion when it comes to employment opportunities as 70% of companies were only employing “where essential” and 20% had frozen recruitment; figures which are similar to the last survey.
The data indicates that more businesses are focusing on expansions and exports with 73% firms planning to expand their operations and businesses next year against 67% in the last survey. Of these, 63% are planning to expand in the UK, while 47% are planning to expand overseas.
To help businesses to compete globally 65% said that they would welcome better regulatory environment, 42% said promoting London and the UK internationally would help them expand and compete, and 39% requested an improved visa and high-skilled migration environment. Most agreed on right skills and education coupled with sustained investment in infrastructure as their priorities to help them operate in the UK.
KPMG London chairman Richard Reid said the capital faced a skills challenge next year as the recovery picks up pace. He warned: “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. Investment in the skills agenda has to be as high a priority as investment in infrastructure if London is going to be able to compete effectively against the likes of Shanghai and Mumbai.”
When asked about a pay review, 28% of firms said they would offer an overall raise in pay in line with RPI, a similar figure to the past 3 years. A quarter (24%) said that they are proposing a targeted rise for some staff only, slightly down from the last three years figure of 27%. 77% of businesses felt that current credit conditions were suitable for them, while 22% said that they were too tight.
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.”