Optimism rises as firms plan to expand

Optimism among London’s businesses about the economy has jumped to 69%, up from 56% last quarter and is now at its highest level since the end of 2010, according to latest CBI/KPMG London Business Survey.

Half of the 134 respondents are optimistic about the prospects for their own firms, with three quarters planning on expanding over the next year. Two-thirds plan to expand in London or within the UK, while just under half plan to expand overseas.

To help firms reach their priority markets overseas they said that having a better regulatory environment, promoting London and the UK internationally and an improved visa and high-skilled migration environment are the most important factors.

In terms of their priorities to help them operate in the UK, the vast majority of respondents highlighted sustained infrastructure investment as the most significant factor for their businesses, followed by developing the right skills and education.

However, despite the optimism slightly more companies are resorting to redundancies than three months ago – 33% compared with 21%. Moreover, the recruitment picture is more or less the same as in the last quarter, with 70% of companies only hiring where essential and 20% freezing recruitment altogether.

And on pay caution remains: 28% of businesses said they would offer a general increase in line with RPI next year, around the same as for the last three years. A quarter said that they plan a targeted increase for some staff only, slightly down from the last three years.

Sara Parker, CBI Director, 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. To successfully rebalance the economy we need UK firms to expand overseas, so it’s good to see that many London businesses plan to branch out to new markets.

“At the same time we need to make sure that London stays ahead as an investment location in the face of tough international competition. Above all, we need sustained investment in infrastructure, especially roads and airports, and a supportive skills and immigration system.”

Richard Reid, London Chairman for KPMG, said: “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.

“More London businesses are now looking to take on apprentices, which is great news and announcements made in the Autumn Statement last week around apprenticeship funding will help with the skills agenda.  However, London businesses need to have a greater role in how apprentices and students coming into the workplace are trained if we are to get the best out of our workforce.

“London houses the UK centre of global commerce with many businesses already operating in or exporting to overseas territories and many see it as the natural next step in their growth plan.

“Europe remains vital for being the hub of the single European market and expanding our growth in the major emerging markets which is so important to our future. But greater awareness of UKTI initiatives designed to help UK plc needs to take place to make sure our London business community do not miss out on the opportunities of the substantial growth offered by these new economies.”

More than two thirds of companies said that current credit conditions were appropriate, while 22% felt they were too tight.

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